INTEGRATED ANNUAL REPORT 2012 - IDC · • IDC has been investing in the development of large...

INTEGRATED ANNUAL REPORT 2012For the year ended 31 March 2012

Innovation, Growth ... Sustainability

IDC Integrated A

nnual Report 2012

Contents

NavigationRead more: This refers to information found in other sources

More information: This guides you to fi nd more information on the IDC website – www.idc.co.za/IR2012

Financial statements: This refers to additional details contained in the annual fi nancial statements

Vision and mission 1

Key achievements and challenges for the year under review 2

Corporate profi le 3

Leadership commentary 12

Stakeholder engagement 20

Our material issues 23

Our strategy 24

Investing in the economy 27

Investing in our customers 61

Investing in our people 64

Environmental impact 71

Governance 72

GRI checklist 82

Assurance statement 85

Annual fi nancial statements 87

Acronyms 176

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Assurance: This refers to information that has been externally assured (limited assurance)

LA

Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012 1

Vision and mission

Vision

MissionThe Industrial

Development Corporation

(IDC) is a self-financing, national

development finance institution whose

primary objectives are to contribute to the

generation of balanced, sustainable economic

growth in Africa and to the economic empowerment

of the South African population, thereby promoting the

economic prosperity of all citizens. The IDC achieves this

by promoting entrepreneurship through the building

of competitive industries and enterprises based on

sound business principles.

To be the primary driving force of commercially sustainable industrial development and innovation to the benefi t of South Africa and the rest of Africa.

Innovation, Growth ... SustainabilityThis theme captures the IDC’s focus in the year under review and provides an indication of the Corporation’s future focus. It is in line with the move towards more sustainable (greener) ways of doing business, both internally and externally. Sustainable growth will therefore be the golden thread that runs throughout the IDC’s fi rst integrated report. In addition, the 2012 report will focus on innovation within IDC and in its relationship with clients and other stakeholders.


Key achievements and challenges for the year under review

This integrated annual report covers our fi nancial and non-fi nancial strategy and performance for the fi nancial year 1 April 2011 to 31 March 2012 and prospects going forward. When we refer to “IDC”, “we” or “our”, we mean the Industrial Development Corporation and its fi nancing subsidiaries. The non-fi nancial part of the report excludes IDC’s operating subsidiaries, joint ventures, leased facilities and outsourced operations. In areas where the boundary is diff erent it has been identifi ed in the report.

In preparing the report, management considered the guidelines on integrated reporting as provided by the International Integrated Reporting Committee (IIRC). Financial information was prepared in accordance with the IFRS while our sustainability-related information has been compiled following the guidelines of the Global Reporting Initiative (GRI G3.1), supported by internally developed guidelines. Our GRI index is available at the end of the report.

IDC has declared a B+ application level in terms of the GRI G3.1 guidelines.

External Assurance providers were engaged to provide assurance on selected sustainability information in this report using the International Standard on Assurance Engagements (ISAE) 3000: Assurance Engagements other than Audits and Reviews of Historical Financial Information. Their report is on pages 85 and 86.

This year we have set out to identify and defi ne our material issues through stakeholder engagement. As this is our fi rst integrated annual report, there are no applicable re-statements from previous years and the structure has changed signifi cantly. Recognising that integrated reporting is a journey, we plan to improve the materiality of the content in future years and align our reporting structure with our business strategy.

We appreciate your feedback. Any queries or comments can be sent to [email protected]

Key achievements• Record levels of funding activity:

° Value of funding approved increased to R13.5 billion from R8.7 billion

° 293 funding approvals in 2012 compared to 221 in the previous year

• Increasing impact on employment:

° 45 900 jobs expected to be created and saved in South Africa through funding approvals, compared to 39 400 in the previous fi nancial year

° 48% of these jobs based in rural areas

• Emerging as a leader in the development of green industries:

° Establishment of the Green Industries Strategic Business Unit

° Participation in funding for 12 of the projects that received preferred bidder status during the fi rst round of the Renewable Energy Procurement Programme (REPP)

° Launched the Green Energy Effi ciency Fund (GEEF) to provide low-cost funding to businesses to implement energy-saving technologies

• Lowering the cost of funding for businesses:

° Sourcing of an additional R2 billion from the Unemployment Insurance Fund (UIF) to use for funding more labour-intensive businesses

• Addressing stakeholder needs:

° Initiatives implemented to reduce turnaround times to improve customer satisfaction

° Maintained high levels of customer service satisfaction (89% customer satisfaction score for fi nancial year 2012)

° Increased consultation and interaction with internal and external stakeholders resulting in improved stakeholder perceptions

• Financial sustainability underpinned by profi ts of R3.3 billion, a 22% increase from previous fi nancial year

• Completed process to establish Small Enterprise Finance Agency (sefa) as a wholly-owned subsidiary of IDC. This will improve service delivery to small, medium and micro enterprises (SMMEs)

About this report

Challenges• Infrastructure constraints adding to the cost of projects

• IDC has been investing in the development of large projects reducing the direct job creation effi ciency of our funding

• Slower economic recovery resulting in lower levels of business confi dence

• More proactive project development approach results in increased costs and risk profi le in the short term, but will result in higher development impact over time

• Attracting and retaining skills

• Higher incidence of applicants misleading the Corporation


Corp

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Our values

Corporate profi le

Our mandate

The Industrial Development Corporation of South Africa Limited (IDC) was established in 1940 by an Act of Parliament (Industrial Development Corporation Act, No. 22 of 1940).

We were established to spearhead the development of domestic industrial capacity, especially in light of the shortages of manufactured goods experienced as a result of the disruption of trade between Europe and South Africa during the Second World War.

For more than 70 years, we have been instrumental in implementing South Africa’s industrial policy, establishing some of the industries that have since become cornerstones of the country’s manufacturing sector. These include the petro-chemicals and minerals benefi ciation industries. Apart from large industrial projects in these industries, we have also been instrumental in the establishment of other industries such as fabricated metals, agro-industries, clothing and textiles.

In the 1990s, our mandate was expanded to allow investment in the rest of Africa. Our fi rst such venture was an aluminium smelter in Mozambique, bringing together investors from around the globe to establish a major industrial operation in a country plagued by decades of civil war. The venture illustrated the viability of large projects on a continent that was often shunned

by investors. Other current investments in the rest of the continent include mining, agriculture, manufacturing, tourism and telecommunications.

We rely on funds generated from our loan and equity investments, exits from mature investments as well as borrowings from commercial banks, other development fi nance institutions (DFIs) and other lenders, to fund our activities.

Although our priorities evolved in line with policy direction over the years, we remain committed to our objective of developing the country’s industrial capacity and, in doing so, play a major role in creating jobs.

Our industrial development role We are a key implementing agency of industrial policy. Currently this centres on the New Growth Path (NGP) and its manufacturing driver, the Industrial Policy Action Plan (IPAP). We identify opportunities for sector development in line with policy objectives and play a catalytic role by developing projects in partnership with our various stakeholders. Our funding activities are mainly to the private sector, but we also work closely with diff erent levels of government, government agencies and sector organisations to ensure a co-ordinated approach. In addition, we support government in other areas related to its development objectives such as research and fund management.

IDC’s role in the rest of Africa is to proactively develop and implement strategies that create and integrate value chains across the continent. By taking advantage of each individual country’s strengths, a more competitive industrial base throughout the region can be ensured.

Our B-BBEE scoreWe are a Level 2 B-BBEE contributor. During the year under review our score was 89.7.

As a State-owned development fi nancier, the IDC believes it is our obligation to ensure economic transformation in the economy and, as such, we will continue to explore ways through which to improve our score.

B-BBEE SCORE

Management and Control 16/15

Employment Equity 13.6/15

Skills Development 13.5/20

Preferential Procurement 16.5/20

Enterprise Development 15/15

Socio-Economic Development 15/15

Inte

grity

Team w

ork

Innovation

Customer

Passion

Professionalism Partnership


Our main business and funding activities

Activities CustomersBusiness lifecycle

Sectoral involvement

Fundingproducts

Regional involvement

• Provision of development fi nance

• Project development

• Research and policy inputs

• Fund management

• Non-fi nancial forms of business support

• Capacity building

• Business

• Government

• Other DFIs

• Conceptual

• Pre-feasibility

• Feasibility

• Establishment

• Product commercialisation

• Expansion

• Mature

• Agricultural value-add

• Mining and mineral benefi ciation

• Manufacturing

• Green industries

• Industrial infrastructure

• Tourism

• ICT

• Media and motion pictures

• Healthcare

• General debt

• Quasi-equity

• Equity

• Export/import fi nance

• Short-term trade fi nance

• Bridging fi nance

• Guarantees

• Venture capital

• Wholesale funding through intermediaries

• South Africa

• Rest of Africa

• Global imports of South African equipment

Satellite offices

Head office

Limpopo

Gauteng

Mpumalanga

North West

Free State KwaZulu-Natal

Eastern Cape

Western Cape

Northern Cape

East London

Durban

Mbombela

Groblersdal

eMalahleni

Secunda

Port ElizabethCape Town

KimberleyUpington

Rustenburg Brits

Polokwane Tzaneen

Thohoyandou

Bloemfontein

Klerksdorp

Mafikeng

Vryburg

George

Pietermaritzburg

Regional offices

IDC offi ces in South Africa

Corporate profi le (continued)


Corp

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Group fi ve-year review

Figures in Rand million 2012 2011 2010 2009 2008

Statement of financial positionCash and cash equivalents* 7 825 5 828 2 866 5 607 5 370

Loans, advances and investments 96 209 94 024 79 265 61 879 78 931

Property, plant and equipment 4 772 4 587 4 136 3 038 3 002

Other assets 3 424 2 367 2 364 2 853 3 130

Total assets 112 230 106 806 88 631 73 377 90 433

Capital and reserves 91 862 92 726 79 189 64 687 75 803

Non-controlling interest 331 342 366 358 45

Other fi nancial liabilities 9 923 6 677 3 527 5 165 5 825

Other liabilities 10 114 7 061 5 549 3 167 8 760

Total equity and liabilities 112 230 106 806 88 631 73 377 90 433

Statement of comprehensive incomeOperating profi t 3 412 2 285 2 008 5 314 2 155

Income from equity-accounted investments (2) 633 40 1 132 1 950

Profit before taxation 3 410 2 918 2 048 6 446 4 105

Taxation (107) (206) 181 (825) (154)

Profi t for the year 3 303 2 712 2 229 5 621 3 951

* To be utilised to fund commitments of R34,36 billion.

IDC value-added statement LA

Figures in Rand million 2012 2011

Value createdNet interest income 1 225 1 014

Impairment losses on loans, advances and investments (1 616) (1 026)

Other income from lending activities 413 293

Other investment income 3 541 2 248

Operating expenditure (511) (436)

3 052 2 093

Value allocatedBenefi ts to employees 750 610

Social spending in communities 59 65

To government as taxation and dividends 79 133

Taxation (including deferred tax) 29 83

Dividends to shareholders 50 50

Value reinvested in operations 2 164 1 285

Transfer to reserves (retained earnings) 2 143 1 248

Depreciation and amortisation 21 37

3 052 2 093


Num

ber o

f job

s

0

50 000

100 000

150 000

200 000

20122011201020092008

Financial year

Num

ber o

f jo

bs

Financial year

0

10 000

20 000

30 000

40 000

50 000

20122011201020092008

Cumulative number of new and saved jobs facilitatedNumber of new and saved jobs facilitated per year

Flow of funding and development impactFive-year period 2008 – 2012

R12.6 bn Repayments received from clients

R3.1 bn Sale of sharesR15.8 bn Income after tax payments

R18.3 bn Borrowings raised Advances to clients in the form of loans

Borrowings repaid Dividends paid

Advances to clientsin the form of equity

R25.2 bn

R13 bn R0.4 bn

R7.6 bn

Cash infl ows Cash outfl ows

Valu

e (R

m)

0

3 000

6 000

9 000

12 000

15 000

20122011201020092008

Num

ber

0

50

100

150

200

250

300

20122011201020092008

Value of approvals per year Number of approvals per year



Corp

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ofi le

Financial year

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

201220112010200920080

10

20

30

40

50

60

70

Val

ue (R

m)

Perc

enta

ge s

hare

Value% share of total value approved

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

20122011201020092008

Financial year

Valu

e (R

m)

Capacity expansions29% 37% Projects and new start-ups

8% Expansionary ownership changes

16% Investments outside South Africa9% Distressed businesses

1% Other

Mpumalanga4% Northern Cape14% Outside SA16%

Eastern Cape8%

Western Cape 8%

KwaZulu-Natal8%

Free State1%

Gauteng23%

Limpopo7% North West11%

Flow of funding and development impact (continued)

Approvals to rural companies (value) per year Cumulative disbursements

Utilisation of IDC fi nancing over fi ve years (2008 – 2012) Financing approved per region over fi ve years (2008 – 2012)


Board of directors

MW HLAHLA (49) (6)

Chairman(Non-executive)BA (Hons) (Economics) (Pomona College – California); Masters in Urban and Regional Planning (University of California, Los Angeles)

Directorships– Findevco (Pty) Limited– Royal Bafokeng Holdings Limited– Praxley Consortium (Pty) Limited

LI BETHLEHEM (44) (5, 9)

(Non-executive)BA (Hons) Industrial Sociology (Wits); Master of Arts (Wits); Certifi cate in Economics and Public Finance (Unisa)

Directorships– Findevco (Pty) Limited– Holds 13 other directorships, details available

upon request from the Company Secretary

PM BUTHELEZI (48) (10)

(Non-executive)BA (Economics) (University of the North); MSc (Economics) (University of Paris); MBA Corporate Finance (University of Sheffi eld)

Directorships– Findevco (Pty) Limited– Group Five Limited– Mervana (10 Benefi ciary Family Trust)– Sanlam Limited– Sanlam Life Insurance Limited

LL DHLAMINI (38) (6, 7, 8)

(Non-executive)BSc (Computer Science) (UCT); BCom (Conversion) (UCT); CA(SA); Post-graduate Diploma in Accounting (UCT)

Directorships– Findevco (Pty) Limited– Xabiso Consulting– Nkwenkwezi Investment– Xabiso CA Inc

MG QHENA (46) Chief Executive Offi cer (Executive)BCompt (Hons) (Unisa); CA(SA); SEP (Wits and Harvard); Advanced Tax Certifi cate (Unisa)

Directorships– Findevco (Pty) Limited– Foskor (Pty) Limited (Chairman)– Acerinox SA

RM GODSELL (59) (6, 7)

(Non-executive)BA (Sociology and Philosophy) (University of Natal); MA (Liberal Ethics) (University of Cape Town), Post-graduate Studies (Sociology and Philosophy) (Leiden University)

Directorships– Findevco (Pty) Limited– Holds seven other directorships, details

available upon request from the Company Secretary

BA DAMES (46) (6, 9)

(Non-executive)BSc (Hons) (University of Western Cape); MBA (Stanford University)

Directorships– Findevco (Pty) Limited– EPRI – USA – World Association of Nuclear Editors (WANO)– World Business Council for Sustainability

Development (WBCSD)– VGB (Electricity Utility Industry Association)

JA COPELYN (61) (7, 9)

(Non-executive)BA (Hons) African Governments (Wits); BProc (Unisa)

Directorships– Findevco (Pty) Limited– Holds 112 other directorships. details available

upon request from the Company Secretary

Legend

(1) Chairman of the Board Human Capital and Nominations Committee(2) Chairman of Board Audit Committee(3) Chairman of Governance and Ethics Committee(4) Chairman of Board Risk and Sustainability Committee(5) Chairman of Board Investment Committee

(6) Member of Board Human Capital and Nominations Committee(7) Member of Board Audit Committee(8) Member of Governance and Ethics Committee(9) Member of Board Risk and Sustainability Committee(10) Member of Board Investment Committee



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LR PITOT (65) (2, 3, 9, 10)

(Non-executive)CA(SA)

Directorships– Findevco (Pty) Limited

NE ZALK (43) (10)

(Non-executive)BA (English and Private Law) (Unisa); Post-grad Diploma in Economics (Development) (School of Oriental and African Studies, London University); MSc Economics (School of Oriental and African Studies, London University)


GS GOUWS (53) Chief Financial Offi cer (Alternate)BCom (Law); BCom (Hons) (UJ); CA(SA); FCMA, Advanced Management Programme (Insead)

Directorships– Kumba Iron Ore Limited– Pebble Bed Modular Reactor (PBMR)– Atlantis Business Park (Pty) Limited– The Export-Import Finance Corporation

of South Africa (Pty) Limited– Herdmans (Pty) Limited– Impofi n (Pty) Limited– Konbel (Pty) Limited– Konoil (Pty) Limited– Kindoc Nominees (Pty) Limited– Findevco (Pty) Limited

During the period under review, the following directors retired:JR Barton

SM Moloko

JC Mtshali

NG Nika

MC Nkuhlu

NN Nokwe

SK MAPETLA (61) (1, 10)

(Non-executive)BSc Chemistry (Lesotho); MSc Analytical Chemistry (USA); Business Management Diploma (Dublin); EDP (Wits); Certifi cate in Financial Analysis (Wits)

Directorships– Findevco (Pty) Limited– Afrika Biopharma Investment (Pty) Limited

(Chairman)– Biotech Labs (Pty) Limited

BA MABUZA (48) (4, 10)

(Non-executive)BA (Mathematics and Computer Science)(Hunter College, City University of NY); MBA (Finance and Information Systems) (Leonard Stern School of Business, NYU)

Directorships– Findevco (Pty) Limited– Afgri Limited– Africa Business News (Pty) Limited– Development Bank of Southern Africa– Airports Company South Africa SOC Limited– Lehumo Women’s Investment Holdings

ZJ VAVI (49) (6, 8, 9)

(Non-executive)General Secretary COSATU


SM RENSBURG (53) (7, 10)

(Non-executive)BA (Management – Accounting and Business Administration) (Webster University, Vienna); MBA (Webster University, London)



Executive management

MG QHENA (46)Chief Executive Offi cerBCompt (Hons) (Unisa); CA(SA), Advanced Taxation Certifi cate (Unisa); SEP (Harvard, Wits)

GS GOUWS (53)Chief Financial Offi cerBCom (Law) (UJ); BCom (Hons) (UJ) CA(SA); FCMA; Advanced Management Programme (Insead)

AP MALINGA (47)Divisional Executive: Mining and Manufacturing Industries BSc (Geology) (UCT); MBL (Unisa)

PB MAKWANE (46)General Counsel and Divisional Executive: Legal Services BJuris, LLB (Western Cape)

K SCHUMANN (43)Divisional Executive: Services Industries and RegionsBHome Economics, MBA (Stellenbosch); Advanced Management Programme (Insead)

JM MODISE (49)Divisional Executive: Human Capital and Support ServicesDiploma in General Nursing; BCom (Unisa); Management Development Programme; Senior Executive Programme; Master in Business Leadership (Unisa)



SAU MEER (49)Divisional Executive: Corporate StrategyBSc (Mechanical Engineering) (University of Natal); MBL (Unisa); Advanced Management Programme (Insead)

U KHUMALO (46)Divisional Executive: Agro and New IndustriesBSc Engineering (Electrical and Electronic) (UCT); MSc Engineering (Electrical Engineering) (UCT); Management Advancement Programme (MAP) (Wits); SEP (Harvard), Advanced Management Programme (Insead)

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NV MOKHESI (51)Divisional Executive: Marketing and Corporate Aff airsBCom (Lesotho); Management Advancement Programme (MAP) (Wits); Advanced Management Programme (Insead)

LP MONDI (49)Chief Economist and Divisional Executive:Professional ServicesBCom (Hons) (Wits); MA Economics (Illinois University); Management Advancement Programme (MAP); Advanced Management Programme (Insead)

G VAN WYK (52)Chief Risk Offi cerBCom (Hons); MCom; MBL (Unisa); Advanced Management Programme (Insead)


The IDC has taken the fi rst step in the journey towards

integrated reporting. The issues deemed material through

stakeholder engagement are articulated in this report and

we also set out salient elements of our business strategy,

both fi nancial and non-fi nancial. Beyond the traditional

performance review, we share our medium- to long-term

plans with our stakeholders.

The South African economy, like many others, continued

to recover from the after-shocks of the global economic

and fi nancial crises during the course of calendar year

2011. However, its goods-producing sectors reported

lower output growth as global demand conditions

deteriorated gradually.

The intensifying sovereign debt crisis and austerity

measures in a number of countries on the Eurozone’s

periphery, coupled with the natural disasters in Japan early

in the year, had a profound impact on economic growth

in major parts of the advanced world. Emerging and

developing economies were adversely impacted by falling

or subdued export demand, a situation often exacerbated

by weakening domestic consumption. Consequently,

the rate of increase in global export trade slowed sharply,

commodity prices either moderated or declined and

industrial production was severely constrained in the latter

part of the year.

South Africa’s manufacturing sector saw its output growth

more than halved as key sub-sectors found it increasingly

challenging to maintain higher production activity. In

turn, the mining sector’s output was only marginally

higher than in 2010, with industrial action in the platinum

industry over the fi nal quarter of the year having had a

considerable impact on overall production.

Domestic fi xed investment activity rebounded after two

consecutive years of contraction although still falling short

of pre-crisis levels. South Africa also managed to attract

a substantial infl ow of foreign direct investment. Business

confi dence remained relatively weak throughout calendar

year 2011, experiencing a sharp decline in the second half

of the year but recovering in the fi rst quarter of 2012. The

low levels of confi dence prevailing among manufacturers

were clearly refl ective of diffi cult trading conditions in

both local and export markets. On the labour front, some

encouraging signs of improvement were visible during

the year, although there is still hesitant demand for higher

employment in many sectors of the economy.

Chairman’s statementChairman’s st

Leadership commentary

Notwithstanding a challenging operating environment, the IDC recorded an unprecedented level of funding activity.


Lead

ersh

ip c

omm

enta

ry

Notwithstanding a challenging operating environment,

the IDC recorded an unprecedented level of funding

activity, having approved R13.5 billion in 293 transactions

over the course of the fi nancial year. A signifi cantly

larger entrepreneurial base was served, many of whom

are new clients. Our proactive eff orts in support of the

economic recovery and the development of industrial

capacity include the off er of special schemes, catalytic

fi nancial support for participants in the nascent renewable

energy segment, increased project development and

the continued provision of funding to companies in

distress. These eff orts have come at a cost to investment

performance as refl ected by the steady increase in

impairment ratios. This underlines the importance of our

solid due diligence and risk management practices so as

to ensure the fi nancial viability of investments and the

long-term sustainability of the IDC.

Financial year 2012 was the fi rst year we implemented

our Leadership in Industrial Development strategy. This

required an alignment of our operational activities with

the priority sectors and respective objectives as set out

in Government’s New Growth Path (NGP) and Industrial

Policy Action Plan (IPAP). We reviewed and restructured

our funding divisions and established a business unit

dedicated to the development of green industries.

The IDC has earmarked R25 billion over fi ve years towards

the development of green industries in South Africa,

demonstrating our resolve to contribute catalytically

to our economy’s transition to a greener growth path.

The Green Industries SBU has already made signifi cant

investments in one year of existence.

We concluded the process of merging Khula, the South

African Micro Finance Apex Fund (SAMAF) and the IDC’s

small business funding into a single unit. As a result, in

April 2012 we launched sefa, a wholly-owned subsidiary

of the IDC focused on the fi nancing of survivalist, small,

micro- and medium-sized enterprises.

The important role of the State in economic development

is being increasingly recognised. Considering the societal

risks of allowing unregulated market forces to guide

a country’s economic trajectory, industrial policy is

re-emerging as a key policy tool both in developing and

developed economies. The IDC’s continued existence and

impact over more than 70 years is, in itself, a manifestation

of State intervention and a sustained recognition of its

relevance. The Corporation continued to shape and

infl uence national policy during the year by providing

advisory and research support specifi cally oriented

IDC has earmarked R25 billion over fi ve years towards the development of green industries within South Africa.


towards securing an enabling environment for industrial

development and funding, as well as identifying factors

impeding industry development.

Backed by our research skills and the expertise

accumulated over the years in numerous industries,

we have been developing and implementing, in

collaboration with other stakeholders, specifi c

development strategies in priority sectors to which IDC

provides funding. In addition to the abovementioned

emphasis on green industries, further examples include:

expanding the fabricated metals, capital and transport

equipment industries on the back of the capital

expenditure programmes of State-owned companies and

other public sector entities; the development of the anti-

retroviral (ARV) pharmaceuticals industry; the expansion of

the motor vehicles and components industry; and value

addition in the agricultural and mineral value chains. Some

of these sector development strategies transcend national

borders so as to leverage our continent’s enviable natural

and human resource base and maximise the benefi ts

associated with regional integration.

Adverse global developments, particularly the sovereign

debt and banking sector crises in several industrialised

economies, are constraining public sector spending

and leading to a renewed liquidity squeeze in many

countries, whilst impacting negatively on consumer and

business sentiment. A more moderate pace of growth is

expected in the United States, unless a further quantitative

stimulus is forthcoming, while the anticipated slowdown

in the Chinese economy is starting to materialise. Both

international investment and trading activity are being

detrimentally aff ected in the process, with the outlook for

economic growth and employment creation deteriorating

in many parts of the world.

Downside risks thus abound for the domestic economy.

Signs of weakness are already emerging and rather

modest growth is anticipated for calendar year 2012.

Strong counter-cyclical action is therefore warranted.

The revised IPAP for the period 2012/13 to 2014/15 scales

up interventions to retain, grow and diversify South Africa’s

industrial base. The wide range of complementary and

integrated measures should assist the IDC in fulfi lling its

Leadership commentary (continued)


mandate. These include further industry designations for local procurement; the Manufacturing Competitiveness Enhancement Programme, which will complement and leverage off the industrial fi nancing packages made available by IDC; the impetus provided by Special Economic Zones to the clustering and competitiveness enhancement of value-adding and labour-absorbing manufacturing operations; and, from the broader regional perspective, a range of programmes that will assist us in promoting economic development and integration in southern Africa and further afi eld.

The massive infrastructure investment programme being rolled out by South Africa’s public sector will improve the competitiveness of local industry through enhanced service provision and cost eff ectiveness. It will also unlock the economic potential of several regions, some of which have a wealth of resources, and create numerous opportunities for localisation. The IDC is contributing considerably to the work of the Presidential Infrastructure Co-ordinating Commission (PICC) as well as to the development of the respective Strategic Integrated Projects (SIPs).

South Africa is also building strong ties with a grouping of dynamic, rapidly growing and populous emerging economies that are fl exing their muscles and altering the balance of economic power globally. The IDC has been engaging constructively with key stakeholders within the BRICS, aiming to develop strong partnerships on the fi nancing, investment and technological fronts. Closer to home, the IDC is actively pursuing its Africa-wide mandate, contributing to the development of competitive value chains, the regional integration drive, and expanding markets for local goods and services.

The IDC has been gearing itself to amplify its eff ectiveness as a contributor to industrial capacity development with the creation of sustainable employment opportunities as a critical outcome. We have already substantially increased the range and levels of our funding and investment activities in fi nancial year 2012. The road ahead may be fraught with challenges and threats, but our human capital wealth, solid fi nancial position and undeniable resolve will make an increasingly visible mark on our country’s and continent’s sustainable development trajectories.

Acknowledgements The achievements of the past year would not have materialised without the commitment and eff orts of the IDC management and staff , who are shaping the Corporation into an indispensable agent for industrial capacity development in South Africa and the continent at large. I express my gratitude for their vital contributions, congratulating the Chief Executive Offi cer and his executive team for their leadership and for living up to the signifi cant challenges faced during the year in a most eff ective manner.

The strategic stewardship provided by the IDC Board has been invaluable and for this I thank my fellow directors. During the year, we welcomed Ms Buthelezi, Mr Copelyn, Mr Dames, Mr Godsell, Ms Mabuza, Ms Rensburg and Mr Vavi as new members of the Board. Their wisdom and insights have already strengthened the collective depth and breadth of our Board. We also bid farewell to Mr Barton, Mr Moloko, Mr Mtshali, Mr Nika, Mr Nkuhlu and Ms Nokwe, who diligently served the Board for several years and contributed to making the IDC the remarkable institution that it is.

Our utmost appreciation is extended to Minister Ebrahim Patel for his invaluable guidance, confi dence in and high regard for IDC as a key contributor to placing South Africa on a New Growth Path, and to Minister Rob Davies for making the Corporation a true partner of his department in the implementation of the Industrial Policy Action Plan.

Ms MW Hlahla26 June 2012

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The IDC has been gearing itself to amplify its eff ectiveness as a

contributor to industrial

capacity development with

the creation of sustainable

employment opportunities

as a critical outcome.


IntroductionPost-recession, the global economy remains fragile.

Forecasts indicate that the economic recovery continues

to be burdened by the persistent Eurozone debt crisis.

In turn, this has impacted signifi cantly on the local

economy.

The Eurozone remains one of South Africa’s principal

trading partners and, therefore, reduced demand in this

monetary union has been aff ecting our export-oriented

sectors, particularly manufacturing. The Asian region, in

turn, has been experiencing a slowdown in growth, with

adverse implications for our exports of minerals as well as

other value-added products.

Naturally, such prevailing conditions would impact on

IDC’s business and its clients. Against the backdrop of such

persistent economic uncertainty, especially in markets that

are critical to South Africa’s economic growth prospects,

the 2011/12 fi nancial year proved challenging.

As a result, the period under review was characterised

by immense resilience as we consolidated our eff orts

to implement IDC’s short- to long-term developmental

goals aligned to those of the shareholder, the South

African Government. Our steely resolve to further

strengthen investment in the economy despite persistent

challenges demonstrates our commitment to growing

South Africa’s industrial capacity. This report acknowledges

our achievements and challenges. It also refl ects on the

environment in which the IDC operated in the period

under review.

Implementing the Leadership in Industrial Development StrategyThe Leadership in Development strategy implemented

in the period under review is beginning to impact on the

Corporation’s activities. It has already led to an increased

number of funding approvals with a large portion of

our funding going towards green-related industries.

As part of our objective to establish the IDC as a driver of

a thriving local green industry, our Green Industries SBU

proactively sought and identifi ed projects that required

both development and growth assistance in this sector.

We remain focused on developing a pipeline of projects

in this sector so that we can build on this momentum.

Despite the challenging economic environment, the

IDC continued to play a counter-cyclical role by further

Chief Executive’s review


Our proactive pursuit of strategic investments in 2012 resulted in a marked increase in our approvals to R13.5 billion.


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strengthening its investment in the economy as shown

in the increase in funding approvals. Given the competing

interest for highly specialised skills required to drive the

Corporation’s development goals, the IDC recognises

the need for a strong human capital base as shown

in initiatives such as its talent management, succession

planning, employee wellness and management skills

training programmes. In addition, the Innovation

Department continues to formulate ideas to improve

client experience. Our relationship with the Economic

Development Department (EDD) has enabled us to

identify bottlenecks aff ecting the implementation of

specifi c projects hampering economic and industrial

growth. Consequently, we have experienced an

improvement in a number of areas, notably on the

issuance of water licences for projects. This has resulted

in improved turnaround times for project implementation

and development.

To further stimulate industrial development, our focus has

been on capacitating other fi nancial institutions. One such

example is the establishment of Small Enterprise Finance

Agency (sefa) – a wholly-owned subsidiary of the IDC

primarily focused on developing Small, Medium and Micro

Enterprises (SMMEs).

Going forward, the focus will be on ensuring that sefa

remains eff ective, effi cient and relevant to the needs of

SMMEs. Through the introduction of direct lending and

planned improvements in its product off ering, we expect

that sefa will play a critical part in supporting the small

business environment – a segment that has the potential

to alleviate the country’s high levels of unemployment.

Ensuring that cost-eff ective funding for businesses

remains our priority, we continue to seek alternative,

cheaper sources of funding. In the year under review,

we concluded a R2 billion agreement with the

Department of Labour aimed at both creating and saving

jobs. We also secured R500 million low-cost funding

from KfW, a German development bank, to encourage

and promote investments in both energy effi ciency

and renewable energy in South Africa.

These funding initiatives complement our ring-fenced

funds such as the Gro-e scheme, which was structured

to create jobs.

To better understand our client needs, we embarked

on a series of roadshows where we engaged with

entrepreneurs and other stakeholders across the

country. One of the major concerns that emerged out

Ensuring that cost-eff ective funding for businesses remains our priority, we continue to seek alternative, cheaper sources of funding.


of the exercise was the need for the IDC to improve on its response times, particularly to requests for funding. We have since reviewed our processes and identifi ed key areas where we could improve without impeding on our risk assessment capabilities. The results of our interventions are indicative of much improved effi ciencies including reduced turnaround times.

We have also implemented tools such as an internet-based application tool, making it easier for businesses to access funding. Face-to-face assistance to prospective clients has been improved through the establishment of a pre-investment business centre at our head offi ce as well as setting up additional satellite offi ces in the diff erent provinces (see map on page 4).

While we affi rm our commitment to improve on our service levels, we have noted with great concern a worrying trend in incidences of misrepresentation by some businesses seeking funding. Such practices only serve to stifl e lending even to genuine businesses. The IDC won’t condone such practices.

Although there has been an improvement in our electricity and water consumption (see page 71), we are implementing a project that will further reduce our operation’s impact on the environment. By utilising the Green Energy Effi ciency Fund (GEEF), we will assist other businesses to also reduce their impact on the environment thereby making a real diff erence in lowering the local economy’s carbon footprint.

Investment performanceThe developmental needs of the country and the direction taken by our government’s policies provide us with the challenge to take the lead in industrial capacity development. In this regard, our in-depth industry knowledge and interaction with key stakeholders has enabled us to play a signifi cant role in contributing to policy development. We continue to align our activities with objectives of the New Growth Path and the Industrial Policy Action Plan.

Our proactive pursuit of strategic investments in 2011/12 resulted in a marked increase in our approvals to R13.5 billion, from R8.7 billion recorded in the previous year, made up of 293 transactions compared to 221 in the previous year. Critically, this enabled us to continue enhancing our impact on employment with approved fi nancing expected to result in the creation and saving of 45 900 jobs compared to 39 400 in 2011.

It is particularly notable that in the year under review, 48% of our employment impact is mainly concentrated in rural areas. This relatively disproportionate impact on

rural areas emanated largely from our investments in the mining and renewable energy sectors, while we also saved jobs in the agricultural sector hard hit by fl oods. A number of the IDC’s initiatives and projects have been aimed at improving backward and forward linkages within or between industries, as well as the formation of higher value-added opportunities.

Financial performanceIn the year under review, the Group’s profi tability increased by 22% to R3.3 billion. This is largely as a result of increased dividend income and increased gains from the disposal of investments, off set to an extent by reduced profi tability from our subsidiaries, mainly Foskor, and losses from equity-accounted investments.

The fair value of investments decreased by R902 million in the 2011/12 fi nancial year compared to an increase of R12.6 billion in the previous year, largely due to a decline in the value of listed investments during the year. The total assets of the Group have increased from R106.8 billion to R112.2 billion, mainly as a result of an increase in loans and advances of 33% to R15.9 billion. This has been funded mainly by borrowings, which increased by 49% to R9.9 billion. Our balance sheet remains strong and provides a suitable base from which to deliver on our future objectives.

Future prospects Moving forward, we will continue to deepen our commitment to developing South Africa’s industrial capacity. It is also encouraging that economic infrastructure and public investment remains at the core of government’s economic growth priorities.

Our participation in various strategic infrastructure projects (SIPs), spearheaded by the Presidential Infrastructure Co-ordinating Commission (PICC), creates the opportunity for us not only to rejuvenate South Africa’s industrial base but to also promote localisation.


It is particularly notable

that in the year under

review, 48% of our employment impact is mainly concentrated in rural areas.


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Acknowledgements This is the fi rst time that we have produced an integrated annual report – a signifi cant milestone in over 70 years of our existence. This achievement, including the establishment of our new subsidiary sefa, would not have been possible without commitment from IDC management and our talented staff that continue to live up to our core values of Passion, Professionalism and Partnership.

I am encouraged by our contribution to improving the socio-economic conditions of marginalised communities through our CSI initiatives. These CSI initiatives demonstrate our commitment to ideals that seek to promote good corporate citizenship.

I am enormously appreciative of the generous support provided by the IDC Board of Directors through the leadership of Ms Monhla Hlahla. Their unwavering support is best demonstrated by the performance of the IDC in the period under review. In welcoming new Board members, I also extend my best wishes and gratitude to all Board members who retired during the year under review. Their contributions largely helped to develop and strengthen the growth of the IDC.

I am grateful to the Honourable Minister Ebrahim Patel for his leadership, guidance and wisdom. Accolades also go to the Honourable Minister Rob Davies and to honourable members of the Economic Development Portfolio Committee under the guidance of the Chairman, Honourable Ms Elsie Coleman, and other portfolio and select committees that we engaged with during the year under review. Your generous support and interest in the activities of the IDC is greatly appreciated.

Mr MG Qhena26 June 2012


Stakeholder engagement

Every two years we measure our corporate reputation using the proprietary Global REPTRACK tool of the Reputation Institute. The most recent study, completed in 2011, revealed that the IDC’s emotional connection amongst its key stakeholders is considered strong at 73 index points, above the global mean for fi nancial services. Further, the IDC has a strong following with 87% of stakeholders trusting the organisation to “do the right thing”.

Stakeholders defi ned the most important of the IDC’s attributes as “off ering high-quality products and services”, “being fi nancially sustainable” and “having a clear vision for the future”. To improve reputation and mitigate risks, the IDC needs to focus on “having excellent managers”, “being a well-organised organisation”, “employee wellbeing”, “off ering value for money products and services”, “meeting customer needs” and “having a positive infl uence on society”.

Broader society, as well as applicants for funding, often have diffi culty in understanding the role of the IDC and its mandate for adding value in the economy.

Indeed, less than two-thirds of our stakeholders are aware that the IDC’s purpose is to provide funding and to support business development.

Considering this challenge, we embarked on a campaign to proactively engage our stakeholders, establish their concerns and expectations, and put forward a clear and feasible strategy for achieving our organisation’s mandate.

In addition to various direct stakeholder engagement events during this fi nancial year, we contracted a third party to conduct various surveys, including customer satisfaction, stakeholder and employee engagement surveys.

We plan to continue building our understanding of the key concerns of our stakeholders and ensure that we maintain a high level of transparency and accountability in our reporting. This will enable us to not only become more eff ective in managing stakeholder expectations, but also maximise the development impact we can deliver.

The criteria for identifying the IDC stakeholders listed in this report was based on three factors, namely:

• Their power to infl uence perceptions about the IDC

• The legitimacy of their engagement with the IDC

• The urgency with which the IDC needs to engage them

The following table provides a brief overview of our stakeholders, their expectations and concerns:


Stak

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Stakeholder category How we engage with our stakeholders Expectations and concerns

Shareholder• Economic

Development Department (EDD)

• Parliamentary portfolio committees

• Three spheres of government (national, provincial and local)

• Board meetings

• Meetings between government ministries and IDC executive and senior managers

• Presentations to parliamentary portfolio committee: economic cluster

• Presentations to provincial executive committees

• Increase impact on job creation• Increase impact of levels of industrial

fi nancing• Be more proactive in identifying opportunities • Finding ways to lower cost of funding • Need to provide a quick service to customers• Investment has to contribute to industrial

development• Need to assist in moving South Africa to a less

carbon-intensive economy and maximise job creation in green industries

• Need to incorporate black economic empowerment and SMME development into industrial development activities

• Co-operate with other spheres of government including government agencies and enterprises to stimulate economic activity in under-developed regions

• Need to consider the impact on women and youth in our development activities

Employees• Board feedback and CEO updates

• Meetings hosted by divisional executives or heads of strategic business units (SBUs) and departments

• Internal newsletter

• Internal events and activities

• Corporate strategy presentations

• e-mail

• Performance reviews

• Targeted presentations on various initiatives

• Quality of leadership

• Communication of strategy

• Work satisfaction and working environment

• Career development, training and advancement

• Reward and recognition

• Fair labour practice

• Open communication and a positive corporate culture

Customers

• Existing IDC clients

• New applicants

• Potential clients

• Website

• Brochures

• Research publications

• Hospitality events

• Annual report

• Existing clients:

° Client visits by SBUs, regional offi ces and Post Investment Monitoring Department

° Stakeholder newsletter

° Direct communication with, and face-to-face visits by SBUs and departments representatives

° Regional roadshows and site visits

• Potential clients:

° Walk-ins, call centre

° Advertising, media releases

° Sector workshops

° CEO roadshows

° Presentations by regional managers to business associations/chambers

° Exhibitions/conferences

• Relevant products and services

• Competitive pricing

• Quality of after-care services

• Expertise in all areas where IDC operates

• Excellent customer service:

° Simplicity of application processes

° Speed of approval process

° Responsiveness

° Legal agreements

• Credibility and sound reputation in the market

• Open communication

• Good governance and leadership


Stakeholder engagement (continued)

Stakeholder category How we engage with our stakeholders Expectations and concerns

Infl uencers

• Regulators

• Media

• Unions and activist bodies

• Media statements

• Annual report

• Presentations by IDC Executive and senior management

• Developmental impact

• Long-term fi nancial viability

• Meet IDC’s mandate

• Adherence to good corporate governance

• Transparency towards all stakeholders

• Ability to innovate

Partners

• Commercial banks

• Co-funders

• DFIs

• State-owned enterprises

• Corporates

• Project developers

• Government agencies

• Rating agencies

• Suppliers

• Researchers


• Annual report

• Direct communication

• Engagement sessions with IDC executive and management

• Presentations on specifi c issues

• Relevance of products and services

• Sharing expertise in key areas

• Financial performance

• Good governance and leadership

• Positive impact on the economy and society

Business

• Business associations (local and international)

• Chambers of commerce


• Annual report

• Direct communication

• Engagement sessions with IDC executive and management

• Presentations on specifi c issues

• Relevance of products and services

• Positive impact on society

• IDC’s infl uence on government policy

• Have experts in the business sector

• Ability to innovate

• Governance and leadership

Communities

• Workers

• NGOs

• Benefi ciaries of IDC activities (e.g. CSI)

• Higher education institutions

• General public


• Annual report

• Engagement through projects

• IDC to be a good corporate citizen

• Expect IDC to be innovative

• Leadership and governance

• Impact on society

• A good employer


Our

mat

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This year, we set out to identify and select our fi nancial and non-fi nancial material issues through stakeholder engagement. In addition, we consulted the IDC Corporate Plan and the Risk Universe documents. These documents outline the Corporation's mandate and main risks, respectively. From this process we identifi ed those issues that are material to the Corporation’s sustainability, and were approved by the Board. We plan to review our identifi cation and prioritisation process over time.

Material issues Section Page

Align our activities with government’s industrial development mandate Strategy 24–26

Improve the socio-economic impact of our activities Client monitoring Responsible funding

62–63 71

Strengthen our engagement with stakeholders Stakeholder engagement 20–22

Maintain our long-term fi nancial viability Directors’ report 92–97

Identify suitable development opportunities that require investment Investing in the economy 27–60

Mitigate the risk associated with investments Enterprise risk management 76–79

Play a proactive role in easing bottlenecks and barriers to development Strategy 24–26

Maintain robust governance to safeguard against fraud and inappropriate investment

Governance Fraud prevention

72–7675

Streamline our organisation to ensure effi cient customer service Strategic business units 27

Ensure that we posses the right skills and human resource capacity Investing in our people 64–68

Entrench innovation in all aspects of the organisation Investing in our customers Innovation

61–6361

Our material issues

More information is available on the web at www.idc.co.za/IR2012


Our strategy


ObjectiveSupport industrial capacity development

Outcomes that will be achieved

Facilitate sustainable direct and indirect

employment

Regional equity(including development

of the rest of Africa)

Growing the entrepreneurial and SME

segments

Expansionary and/or broad-based black economic empowerment

Environmentally sustainable growth

Grow sectoral diversity and increase localisation

Four strategic pillars and initiatives

Industrial developmentContributing to an

enabling environment

Leveraging IDC’s portfolio for maximum

impact

Customer service and environmental impact

• Sector focus in line with NGP and IPAP

• Project development

• Industrial fi nance

• Sector development strategies

• Regional industrial integration

• Proactive role in shaping and infl uencing policy

• Address factors impeding industry development

• Role clarifi cation, partnership with and support for other DFIs

• Segmenting IDC’s portfolio and designing customised funding schemes as an enabler for development

• IDC’s funding model

• Improved customer service

• Improved effi ciencies

• Reducing IDC’s impact on the environment

• Reducing industries/IDC client impact on environment


Our

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IDC’s Leadership in Industrial Development strategy is designed to allow it to achieve its objective of industrial capacity development and the outcomes that we want to achieve.

The strategy was developed during the previous year and is built on the following four pillars:

• Industrial development

• Contributing to an enabling environment

• Leveraging IDC’s portfolio for maximum impact

• Customer service and environmental impact

Industrial DevelopmentTo achieve our vision of being the primary driving force of commercially sustainable industrial development, both locally and in the rest of the continent, we have to increase the role that we play in industrial development. To this end we have the following key focus areas:

• Sector focus in line with the NGP and IPAP – By focusing our operational activities on the sectors prioritised by these policy documents, IDC can utilise its resources more eff ectively. As a result of this initiative, IDC phased out funding towards certain industries during the year while increasing its focus on others

• Project development – One of our key strengths is the skills and experience within IDC to develop and implement industrial projects. We aim to increase IDC’s early-stage project development activities. This takes place particularly in those areas where opportunities exist, but remains under-utilised for various reasons. Increased assistance to project promoters during early project development is also envisaged

• Industrial fi nance – The strength of our balance sheet enables us to fund activities that expand industrial capacity in the country and beyond. We aim to grow the level of funding towards those areas where opportunities exist, but do not readily attract funding from commercial banks

• Sector development strategies – Sector-specifi c strategies are being developed to channel funding and activity towards the most appropriate areas. These strategies are based on thorough analyses of each industry to ensure that opportunities and constraints are well understood. Strategies are broken down into action plans with clear milestones and responsibilities

• Regional industrial integration – For South Africa to achieve its full economic potential, it will have to intensify co-operation and integration with the rest of the continent. IDC’s role in this will be to proactively develop and implement strategies that develop value chains across the continent by taking advantage of individual country’s strengths. This will ensure a more competitive industrial base throughout the region

Contributing to an Enabling EnvironmentWhereas the fi rst pillar of our strategy talks primarily to how we envisage implementing policies, the second pillar addresses the role that we play in assisting government to strengthen policies and other agencies that will improve the region’s ability to develop. Three areas are addressed:

• Proactive role in shaping and infl uencing policy – We have signifi cant industry expertise and insight into the productive side of the economy built on our research activities and constant engagement with government and the private sector. This expertise is being utilised to inform policy makers on potential changes across a wide range of policies and policy instruments that are needed to increase industrial development

• Factors impeding industry development – Through our involvement in project development and implementation, as well as through our interactions with entrepreneurs, we identify obstacles that hinder industry development. These include disruptive policies and bureaucratic ineffi ciencies. In partnership with the Economic Development Department (EDD), we are bringing these obstacles to the attention of the relevant government departments, with EDD monitoring progress on the removal of these impediments

• Role clarifi cation, partnership with and support for other DFIs – As we bring our investment focus in line with our strategy, the risk exists that certain market segments will lose vital support. To counter this, we embarked on a process to assist other DFIs to successfully service these segments, with the priority given to those tasked with developing the small business sector

Leveraging IDC’s Portfolio for Maximum ImpactOur third pillar relates to the eff ective utilisation of our balance sheet to realise our development mandate:

• Segmenting IDC’s portfolio and designing customised funding schemes as an enabler for development – Our balance sheet not only allows us to increase the levels of our funding, but the income generated from legacy investments also permits us to re-invest in targeted projects with a higher development impact. This initiative allows for the Corporation to design customised funding schemes to act as very specifi c interventions aimed at achieving pre-determined objectives. These schemes will typically provide funding at terms that are more favourable than our normal funding

• IDC’s funding model – In order to meet the development goals of the NGP and IPAP, we have to raise our investment activities substantially over the next few years. This requires us to secure alternative sources of funding at competitive rates beyond what we can draw from our existing sources. This initiative is aimed at reviewing IDC’s sources of funding and exploring alternatives, especially those where funding can be sourced at more competitive rates


Our strategy (continued)

Customer Service and Environmental ImpactThe fourth pillar is concerned with improving our customer service delivery and reducing our impact, as well as the impact of our investments, on the environment:

• Improved customer service and effi ciencies – A notable area of improvement in terms of customer service is turnaround times. This initiative aims to reduce turnaround times and increase our effi ciencies through innovative processes to improve service delivery

• Reducing our impact on the environment – This initiative focuses on reducing IDC’s carbon and water footprints

• Reducing industries/IDC clients’ impact on environment – The focus of this initiative is to assist companies to reduce their environmental impact. Our initial focus will be to provide funding to companies that are implementing plans to improve energy effi ciency

Supporting FactorsThe implementation of the strategy relies on several other factors in the Corporation being in place, including:

• Cementing good governance and risk management structures

• Continually assessing and optimising our risk appetite

• Being prudent in the management of our fi nances

• Maintaining a motivated, diversifi ed and skilled team of employees

Corporate targets 2012/13

2012/13

Perspective Indicator Target Stretch target

Industrial capacity development

Implementing projects 70% of projects start production

100% of projects start production

Value of transactions signed R15 billion R22 billion

(disburse at least R8 billion)

Development impact Jobs expected to be created/saved in South Africa 30 000 41 000

(at least 7 000 in rural areas)

Actual jobs expected to be created/saved in South Africa 20 000 25 000

Financial effi ciency Cost to net fi nancing income (excluding impact of mature listed investments)

61% 54%

Stakeholder relations and customer satisfaction

Turnaround time on non-complex transactions 17 working days 15 working days


Achievement of industry development milestones Milestones for 80% of initiatives achieved

Milestones for 90% of initiatives achieved

Financial sustainability Five-year growth in reserves CPI + 2% CPI + 4%

Level of impairments <18% 16%

Human capital Employee Engagement Survey Index against High Performance Norm

+1 above high performance norm

+3 above high performance norm

Stakeholder relations and customer satisfaction

IDC reputation (measured through survey) Measured every second year

Innovation Entrenchment of an innovative culture across IDC (measured through survey)

Measured every second year


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Investing in the economy

Strategic business units (SBUs)The core developmental funding interventions of IDC are carried out by 13 SBUs, each focused towards the various sectors as identifi ed in the NGP and IPAP.

During the year under review, we successfully restructured our SBUs and, where required, re-organised their areas of focus. This ensures better alignment with our industrial development mandate. The following structural changes were made:

• SBUs renamed:

° Techno Industries to Information and Communication Technologies (ICT)

° Wood, Paper and Other to Forestry and Wood Products

° Food, Beverage and Agro-Industries to Agro-Industries

• SBUs dissolved:

° Transport, Financial and Other Services

° Public and Private Partnerships

° Construction

° Franchising

• New SBU introduced:

° Green Industries

The activities of the Public Private Partnerships SBU and some of the activities of the Transport, Financial and Other Services SBU were incorporated into the Strategic High Impact Projects (SHIP) SBU and we phased out our involvement in the Franchising and Construction sectors. The new Green Industries SBU was established to develop and fund projects related to green energy and the move towards a low-carbon economy.

Our operational divisions and respective SBUs

Agro and New Industries Mining and Manufacturing Industries Services Industries

• Agro-Industries

• Green Industries

• Strategic High Impact Projects

• Venture Capital

• Chemicals and Allied Industries

• Forestry and Wood Products

• Metals, Transportation and Machinery

• Mining and Mineral Benefi ciation

• Textiles and Clothing

• Information and Communication Technologies

• Healthcare

• Media and Motion Pictures

• Tourism


Agro-Industries SBU

Performance 2012 2011 2010

Total value of fi nancing approved (Rm) 765* 937 770

Total number of jobs expected to be created or saved

5 057 4 198 3 133

Impairments as % of outstanding book (at cost excluding undrawn commitments)

17% 20% 26%

* Approvals of R68 million utilising the Agro-Processing Competitiveness Fund are excluded.Focus areasInternationalisation – Globalising SA brands and incorporation of SA companies into global supply chainsValue addition – Horticultural and grain surplus value additionImport replacement – Seed oils and oil cake; malt productionEmerging industries – Marine aquacultureRural/poor linkages – Rural agricultural linkage scheme; one-stop, agri-business support initiative

Green Industries SBU

Performance* 2012

Total value of fi nancing approved (Rm) 5 485

Total number of jobs expected to be created or saved 2 689


4%

* The Green Industries SBU was established on 1 April 2011.Focus areas Non-fuel power generation – Wind, concentrated solar and photo-voltaic solar power generationEnergy effi ciency – Heat, electricity and buildings; cleaner production/industrial processesFuel-based energy – Waste-to-energy; co-generationBio-fuels – Bio-ethanolEmission and pollution mitigation – Waste management/recycling; clean stovesRelated services – Energy servicing companies (ESCOs)

Strategic High Impact Projects (SHIP) SBU

Performance* 2012

Total value of fi nancing approved (Rm) 1 561

Total number of jobs expected to be created or saved 2 670


5%

* SHIP did not have an investment mandate prior to 2012.Focus areasCross-sectoral/new sectors – Localisation project; bamboo; sisal; green transport; gypsum; battery; titanium; rolling stock; theme park

Industrial infrastructure – Power generation; toll roads in rest of Africa

High impact logistics – Railways; maritime

Investing in the economy (continued)


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Venture Capital SBU


Total value of fi nancing approved (Rm) 187 51 68

Total number of jobs expected to be created or saved 697 267 104

Impairments as % of outstanding book (at cost excluding undrawn commitments) 35% 41% 40%

Focus areas Provision of funding and post-investment advice, support and guidance to enable the completion of the development of globally unique South African intellectual property into market-ready products, followed by the commercialisation thereof in any industry or sector, locally and/or internationally.

Chemicals and Allied Industries SBU


Total value of fi nancing approved (Rm) 714 541 1 555

Total number of jobs expected to be created or saved 3 283 1 703 1 059


Focus areas Establish clusters of production for local benefi ciation – Titanium, zirconium, hydrogen fl uoride production, plastics, petro-chemicals

Address market imbalances – Glass, import substitution opportunities

Security of supply for key inputs into infrastructure, food and energy needs – Fertiliser and fertiliser inputs, gas, building products

Forestry and Wood Products SBU



Total number of jobs expected to be created or saved

6 551 889 2 662


33% 34% 35%

Focus areas Forestry value chain – Forestry, sawmilling, pulp and paper, packaging, furniture and other value-added products


Business structureInvesting in the economy (continued)

Metal, Transport and Machinery Products SBU


Total value of fi nancing approved (Rm) 1 700 2 104 714



Focus areas Fabricated metal, capital and transport equipment – SOC capex programmes; tooling, die and mould industry; foundries; medium and heavy commercial vehicles (MHCV)

Automotive and MHCV – Assembly; EV; components; MHCV, buses and taxis

Components for green industries – Energy-saving technologies; wind; solar components

Advanced manufacturing – Aerospace

Mining and Mineral Benefi ciation SBU


Total value of fi nancing approved (Rm) 3 551 737 3 143



Focus areas Steel prices – Provide competitively priced steel

Early stage projects – Support to junior mining companies from project initiation to implementation

“New age” minerals – Rare earth elements

Rest of Africa – Development of mineral resources

Textiles and Clothing SBU





Focus areas Building a conducive environment – Leading role in development of national strategy including refi nement of incentives for the sector

Competitive local/regional value chain – Regional projects; linkages between manufacturing and retail; value chain projects; wool and mohair cluster; leather and footwear cluster

Stabilise major investments in the portfolio


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Information and Communication Technologies (ICT) SBU



Total number of jobs expected to be created or saved 1766 2 131 3 000


Focus areas Telecommunication – Undersea; national backhaul; metro; last mile; focus on under-serviced areas and rest of Africa

Shared services – Value-added components of Business Process Outsourcing

Digital migration – Local manufacture of set-top boxes

e-waste – Recycling of electronic waste

Electronics – Niche low-volume electronic manufacture; demand-side management including smart meters

Information technology – Contract-based software and hardware

Electrical services – Contract based

Healthcare SBU



Total number of jobs expected to be created or saved 1 626 1 606 (160)*


* Negative job numbers refl ect the impact of cancellations of previous year’s approvals.

Focus areasPharmaceuticals – Anti-retrovirals (ARVs) pharmaceuticals; anti-diabetic extract; codeine from medicinal poppies

Malaria – Artemisinin Combination Therapy (ACT) extract and pharmaceuticals, impregnated bed nets; sterile insect technology

Medical devices – Surgical instruments; HIV test kits, etc.

Hospitals – Hospital PPPs; private wards in public hospitals; private hospitals (acute and sub-acute); day clinics; PHC centres focusing on maternal health



Media and Motion Pictures SBU



Total number of jobs expected to be created or saved 1 400 898 (141)*


* Negative job numbers refl ect the impact of cancellations of previous year’s approvals.

Focus areasMotion picture value chain – Film production (low, medium and high budget); production facilities (Johannesburg studios, post-production); audience development (digital cinema, rural and township cinemas, channel aggregation for export); animation hub

Music value chain – Production and distribution of SA music

Broadcasting – Pan African television broadcasters (expansion of SA broadcasters); regional and community radio stations; community television stations

Tourism SBU



Total number of jobs expected to be created or saved 447 276 489


Focus areasProperties in distress and consolidation of the industry – Assist select establishments until economic conditions improve

Underdeveloped tourism nodes in SA – Backpackers; adventure and sports tourism; natural attractions; heritage attractions; avitourism; beach tourism; arts and crafts; enabling tools, e.g. tourist routes, transportation

Rest of Africa – Refurbishment of existing properties; new properties; business hotels

Job creation is a critical outcome of our funding activity.



Green IndustriesOverviewSouth Africa has one of the most carbon-intensive economies in the world due to its heavy reliance on coal for energy generation. This makes the greening of its energy mix a national imperative.

According to the Integrated Resource Plan (IRP2010), the South African government envisages that renewable energy will contribute 42% of the total generation capacity of the country by 2030. The New Growth Path contributes to this goal by endorsing a considerable amount of clean energy infrastructural investment.

According to research conducted in 2011 by the IDC’s Research and Information Department, the Development Bank of Southern Africa and research group TIPS, greening the local economy could potentially create more than 460 000 direct jobs by 2025.

Strategy As South Africa transitions to a low-carbon economy, IDC has earmarked R25 billion over the fi ve years to 2015/16 for the development of green industries within the country. The bulk of this funding will be disbursed by the Green Industries SBU.

The objective of the newly created Green Industries SBU is to develop, grow and invest in green industries by focusing on investments that enhance environmental protection and support the reduction of carbon emissions. Investments will further aim to establish and build a local green industry value chain.

Ensuring an enabling regulatory environment is key to meeting the objectives of the Green Industries SBU. The Department of Energy’s (DoE) Renewable Energy Procurement Programme (REPP) was launched in August 2011 to administer fi ve procurement rounds which aim to see a total of 3 625 MW of generation capacity being created by 2013. The Green Industries SBU has played an active role in the REPP process as a development partner and fi nancier.

Read more Green Jobs Report www.idc.co.za


The SBU has committed R5.2 billion to REPP’s fi rst round of bidding towards 12 of the successful REPP projects in round one.

PerformanceThe SBU has committed R5.2 billion to REPP’s fi rst round

of bidding. This represents two concentrated solar projects,

four wind projects and six photovoltaic projects. The target

date for starting construction on these projects is late

2012. In the second bidding round, after year-end, seven

projects with a total capacity of 380 MW and funded by the

IDC were awarded preferred bidder status. This represents

an additional R2.3 billion investment. In total, the Green

Industries SBU has committed R7.5 billion worth of

investments in green industries, of which R1.5 billion goes

directly to local B-BBEE communities. LA

In partnership with KfW, a German development bank,

the Green Industries SBU launched the R500 million

Green Energy Effi ciency Fund (GEEF) to stimulate

investments by local entrepreneurs focusing on energy

effi ciency of at least 20%, as well as self-use renewable

energy projects. During the period under review,

R96 million (19%) of the R500 million fund has been

allocated, representing eight projects ranging from

co-generation to waste-to-energy (bio-gas from abattoir waste), solar water heating and rooftop photovoltaic. Demand-side energy management and energy usage concerns will be addressed by funding energy servicing companies (ESCOs) responsible for the mass roll out of energy effi ciency technologies. LA

An impact assessment and monitoring tool will be developed to monitor the energy effi ciency and carbon saving on an annual basis.

This is part of technical assistance from KfW and will be executed by the Post Investment Monitoring Department.

The SBU continued to chart new frontiers in the area of solar water heaters (SWH) through innovative funding structures. These combine carbon fi nance and rebates off ered under Eskom’s Integrated Demand Management (IDM) programme. As an example, the IDC provided fi nance to the Solar Academy of Sub-Saharan Africa (SASSA), a local solar water heater company. SASSA has since rolled out more than 80 000 Low Pressure Solar Water Heaters (LPSWH) and 2 500 High Pressure systems nationally. In total, 200 000 solar water heaters will be installed covering nine sites and creating over 800 jobs.

Solar water heater roll outs of this kind, both small and large scale, have great potential as carbon trading projects either under the Clean Development Mechanism (CDM) – formulated as part of the Kyoto Protocol in 1997 – or through voluntary markets. The CDM allows developed nations to purchase carbon credits through approved renewable energy projects in developing countries to off set their own emissions. The SASSA project will sell carbon credits on the voluntary market through Verifi ed Emission Reductions (VER). To date, SASSA has the only registered CDM project for Low Pressure Solar Water Heaters (LPSWH) in the world. This makes SASSA’s LPSWHs eligible for an additional revenue stream from the carbon credits, thus improving the sustainability of the SASSA business model.

Future focus The SBU continues to engage government and other key stakeholders in support of the development of a sustainable market for bio-ethanol. Following the approval of the emission and pollution mitigation strategy by IDC’s Executive Committee in early 2012, the SBU will develop funding options for waste management and recycling technologies.

The SBU will continue exploring opportunities to expand South Africa’s capacity in the green energy arena with projects including renewable energy capacity, fuel-based green energy, energy effi ciency, waste management, waste recycling and the expansion of bio-fuels. Recent budgetary announcements in support of the roll-out of SWHs are a positive market signal for energy effi ciency and demand-side management interventions. In evaluating future prospects, increased focus will be on the contribution to local production, broad-based BEE participation and job creation.

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Read more Status and scope for energy effi ciency measures in SA


Case study

South African Calcium CarbideSouth African Calcium Carbide (Pty) Limited (SACC) is Africa’s only producer of calcium carbide, which is a product used in the desulphurisation of steel and in the production of Acetylene. Acetylene is mainly used in the welding industry. SACC is an energy intensive company that has opted for cheaper energy alternatives to counter rising electricity tariff s. This will, in the long term, enable the company to sustain the revenue momentum.

SACC will use funding from the IDC to develop an 8 MW co-generation facility. The co-generation facility will serve as both a cost saving initiative and a security of supply measure, the latter being a pre-requisite to maintaining production levels, thus boosting the company’s organic growth plans.

SACC currently accounts for approximately 50% of the electricity that Eskom supplies to the Newcastle region. Energy currently accounts for about 21% of SACC’s operational costs and that is set to rise to 34% following adoption of recent tariff increases. This facility will therefore help the company to mitigate eff ects of Eskom’s hike.

The new plant will reduce SACC’s total energy costs by 20% after project implementation.

Development impactSACC supports local businesses by utilising locally sourced raw material like anthracite and lime. The raw materials sourced from local suppliers means that jobs are in turn created in the local communities. Therefore the sustainability of the company is critical to preserving jobs within these communities.


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Venture CapitalOverviewAcross the globe, traditional venture capital fi rms have been struggling since the global economy slumped in 2008. Uncertainty in the global fi nancial markets has prompted most venture capital fi rms to re-assess their exposure to technology-focused start-up businesses.

Strategy The Venture Capital SBU endeavours to address the lack in the commercialisation of South African technology and industrial innovation. The SBU is making considerable headway by investing in niche sectors to promote the advancement of local technology.

Through strategic partnerships and active engagement with several industry bodies, the SBU is able to identify unique funding opportunities for further development. This approach has allowed the SBU to cope with the economic downturn reasonably well.

PerformanceDuring the period under review, the SBU fi nancially supported the Institute of Inventors and Innovators to re-establish and upgrade the institute. Amongst other services, the institute aims to assist inventors through the provision of networking opportunities and information on available resources.

The majority of the companies in the SBU’s portfolio have made adequate progress towards commercialisation while three companies have exceeded expectations. Photovoltaic Technology Intellectual Property (PTIP) is a spin-off company from the University of Johannesburg (UJ) which owns the patented intellectual property for producing thin-fi lm solar modules. PTIP’s aim is not to commercialise the technology itself but to provide licences to interested parties who wish to set up production plants to manufacture solar panels using the new technology.

Quorus Biotech has developed unique bio-reactors that enable the growth of organisms that are diffi cult to culture and produce effi ciently as well as biological compounds for the bio-tech industry’s research and development arm. Yebo Tech, another of the SBU’s investments, has developed an electronic in-store security system and management software. Yebo Tech is currently rolling out the system nationally for a major retail chain.

Lodox remains one of the most innovative investments in the SBU’s portfolio. Lodox is a low-dose X-ray machine that can produce a whole-body image in 13 seconds. The main target market for Lodox is the trauma centres in public hospitals.

Future focusThe SBU will continue to develop and commercialise South African intellectual property by providing equity funding and proactive post-investment support to clients.

The majority of the companies in the SBU’s portfolio have made adequate progress towards commercialisation.

Read more The relevance of the bio-technology industry to SA’s healthcare sector



Agro Industries OverviewThe local agro-industrial sector is polarised between a few large modern, dynamic, vertically integrated and diversifi ed agro-processing companies contributing to more than 70% of turnover in the sector on the one hand and on the other, around 7 000 smaller-scale food processors, un-integrated and often outside the formal retail chain.

Whilst it is of critical importance to facilitate the growth and development of large companies – to ensure that South African food brands benefi t from opening markets in the rest of the continent and other trade partners – it remains important to address the barriers to entry and barriers to growth that these smaller companies face. Strong competition from subsidised economies, increasing administrative costs, increased packaging costs and the strength of large retailers, are major factors aff ecting the growth of the local agro-processing industry.

Despite challenges, the IDC recognises the need to grow the local agriculture value chain. An increased agricultural output will not only result in the creation of additional rural agro-processing plants, but will also boost the country’s food security. The Agro-Industries SBU provides support to a wide range of food and non-food production activities in the agricultural value chain.

StrategyThe recent strategic shift of the SBU towards agro-processing away from primary agriculture has changed the investment and risk focus of the SBU. It can be argued that the risk/return profi le of agro-processing is better than that of primary agriculture and that therefore investments of the past year did contribute to IDC’s fi nancial sustainability. The SBU is also focusing on strengthening value-adding industries that emphasise the benefi ciation of local products.

We are currently focusing on the labour-intensive horticultural sector and the grain industry. Food imports remain an area of concern and we need to ensure that we replace these imports with competitive local production. Following on our reputation for creating new and innovative industries, we are also targeting seed-oil processing and malt production. We are also developing the marine aquaculture sector which will address specifi c development challenges of our smaller coastal towns.

PerformanceSustainable agro-industrial projects that have a high economic impact on rural communities are a high priority for funding consideration. In the period under review, the SBU approved funding to, amongst others, a soya processing plant in Gauteng (Russelstone Protein). This project will facilitate the competitive import replacement of soya oil cake in South Africa. The transaction comprises the establishment of the fi rst dedicated (soya oil cake-focused) commercial scale soya crushing facility (of 240 000 tons per annum) in the Bronkhorstspruit industrial area.

Further funds were also approved for two Ultra Heat Temperature processing facilities in KZN and Eastern Cape to assist milk farmers to move up the value chain and help them improve their margins. One of these facilities is Coega Dairy located in the industrial development zone close to Port Elizabeth. The funding will enable the company to ramp up milk production and will ultimately be able to process 110 million litres of milk per annum.

Future focusFuture plans see the funding activities of the SBU increasingly weighted towards the agro-processing sector. Pure primary funding will be directed to the Land Bank. The SBU is focusing on cutting-edge initiatives including localised value addition, emerging industries and the linkage of agro-processors with smaller-scale, resource-poor suppliers and farmers in rural areas.

The SBU is focusing on cutting-edge initiatives including localised value

addition, emerging

industries and the linkage

of agro-processors with

smaller-scale, resource-

poor suppliers and farmers

in rural areas.

Read more A strategic overview of the hemp industry

Read more An overview of the grain milling industry in SA



Case study

Big SixIn 2011, Ramnet Holdings and NLM Holdings approached IDC to obtain funding for the joint purchase of Inline. Inline is the biggest achaar producer in South Africa with a 40% market share. It produces mango achaar in three brands: Big Six, Mango Man and Summertime. The brands, particularly Big Six and Mango Man, are well known amongst its target market which is the lower-middle income consumers. To cater for the growing and diversifi ed customer base, Inline extended its product line to include a vegetable achaar. The company is based in Limpopo and currently supplies the achaar to three major retail groups, as well as some independent retailers, in four South African provinces.

Development impactThe funding from IDC will contribute to increasing participation of emerging black entrepreneurs within the food processing industry. In addition, Inline contributes to boosting the local economy by sourcing its mangoes, which are the main ingredient, from local smallholder farmers in the Vhembe district where the factory is located.


PerformanceIts fi rst major investment will facilitate the formation of Thelo Rolling Stock (TRS), a company that is strategically positioned to benefi t from Transnet’s rolling stock renewal project. As a rolling stock leasing company, TRS will procure rolling stock from local manufacturers. This will boost local manufacturing by encouraging companies to use locally sourced material.

Future focusThe local production of busses, taxis and trucks is also being explored. The SBU will continue to identify in collaboration with other SOCs, particularly Eskom and Transnet, specifi c high impact localisation opportunities. Beyond examining government’s infrastructure projects, SHIP is conducting a pilot project in Malamulele, Limpopo Province, to test the viability of creating a sisal industry in South Africa.

Strategic High Impact Projects (SHIP)OverviewThe Presidential Infrastructure Co-ordinating Commission (PICC) recognises the need to urgently overhaul and expand existing infrastructure as part of an ambitious plan to stimulate economic growth. The plan prioritises investment in logistics and energy generation and transmission across the country. These investments have the potential to deliver high developmental impact, promote new industries and drive job creation.

Transnet, Prasa and Eskom, among other State-owned Companies (SOCs), are also set to drive the R835 billion infrastructure capital expenditure earmarked by government, further unlocking signifi cant investment opportunities.

StrategyThe mandate of the SBU was altered during the year. It explores investment opportunities to strengthen the logistics and transport corridor between South Africa’s main industrial hubs and improve access to export corridors.

In addition, the unit manages cross-sectoral high impact projects.

SHIP explores investment opportunities to strengthen the logistics and transport corridor between South Africa’s main industrial hubs and improve access to export corridors.


Read more An overview of SA’s railway equipment sector

Read more The mini-bus taxi industry and its recapitalisation potential


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More information is available on the web atwww.idc.co.za/IR2012

Chemicals and Allied Industries OverviewCurrently, South Africa is still a net importer of raw and fi nished chemical products. Through IPAP, government aims to cut down on these imports by growing the local chemical industry. However, the shortage in specialised skills, including engineers and artisans, poses the biggest threat to the large-scale industrialisation of this sector.

StrategyThe objective of the Chemicals and Allied Industries SBU is to develop new industries that are geared towards the local manufacturing of chemical products. The SBU invests in both up and down stream chemical industries to ensure benefi ciation. The industries include base oil, including oil and gas, plastics and rubber cement and concrete, cosmetic glass and ceramics. Specifi c focus is given to inputs into agriculture (fertilisers), energy and infrastructure as well as targeting benefi ciation opportunities for value addition within South Africa and the region.

PerformanceThe fair value of investments in the SBU’s portfolio remained stable during the course of the year with some investments increasing whilst others declined. The SBU’s largest equity investment is in Foskor (Pty) Limited, which continues to dominate the SBU’s portfolio.

In the period under review, the SBU approved additional funding to Econo-Heat Energy Effi cient (Pty) Limited a company specialising in the manufacturing of wall-mounted panel heaters and electric blankets. The Cape-based company is growing its footprint in the local and export market and IDC provided trade fi nance to assist the company in achieving its growth plans.

Bliss Chemicals, a Gauteng-based company specialising in the manufacturing of washing powder, received further funding to increase its plant capacity while PG Group (Pty) Limited was given a capital injection to help survive the implied downturn within the motor vehicle glass manufacturing sector. Our intervention in PG Group helped save 431 jobs.

Further investments were made in Ohorongo Cement (Pty) Limited, a Namibian-based portland cement manufacturing company in which the IDC holds a substantial stake. The cement manufacturer has quickly grown to become the largest employer in Namibia’s Otavi region and boasts an output of 750 000 tons per month.

Future focusThe SBU will focus on infrastructure development opportunities relating to materials, plastic and rubber conversion as well as the manufacture of speciality and fi ne chemicals (mineral chemistry benefi ciation) and gas projects. While growing South Africa’s chemical and industrial capacity, the SBU has also identifi ed potential opportunities within the SADC region.

The SBU focuses on areas such as agriculture (fertilisers), energy and infrastructure inputs as well as targeting beneficiation opportunities for value addition within South Africa and the SADC region.

Read more An overview of the plastic fabrication industry and polypropylene benefi ciation in SA


Case study

Ohorongo CementOhorongo Cement Limited was established by Schwenk Namibia. The portland cement manufacturer became fully operational in 2011 although other sections of the plant became operational in 2010. The IDC currently holds a 20% share in Ohorongo Cement, while DBSA, Development Bank of Namibia and Schwenk Namibia hold the other 80%. In the year under review, the IDC advanced further funding to Ohorongo Cement so that the company could purchase Afrisam Namibia, a local cement manufacturer.

The acquisition of Afrisam Namibia will ensure the sustainability of Ohorongo Cement and boost the supply of cement in Namibia, which currently has no other cement manufacturer. This will enable the company to compete in Botswana and Zambia.

Development impactA key objective of the IDC is to help stimulate economic and social growth through funding high-impact infrastructural and industrial projects in neighbouring SADC countries.

The investment in Ohorongo Cement seeks to achieve this objective. Since commencing operations, the cement company has grown to become the largest employer in Otavi, a small town in Namibia. It has an output of 750 000 tons per month.


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PerformanceThe Forestry and Wood SBU approved distress funding to one of South Africa’s largest furniture manufacturers to save more than 5 500 jobs. The IDC has in previous years played a small role in funding Mabandla, a community-owned forestry project in Eastern Cape. Building on experience from its involvement in Mabandla, the IDC is now rolling out this very successful model to other communities, namely the Sihleza project as well as the Cata Forestry project in rural KwaZulu-Natal and the Eastern Cape, respectively.

Future focusThe SBU has proactively developed a healthy pipeline of projects, some of which, barring regulatory hurdles, could come on stream in the next fi scal year. The unit has also expanded its reach beyond South Africa to develop the timber industry and supplies across the continent.

Forestry and WoodOverviewForestry is a key economic driver in rural areas, both through the establishment of new plantations and the resultant secondary processing and value addition industries arising from increased timber resources. Despite the industry’s potential, the chronic under-utilisation of land in rural areas deprives local communities of potential job-creating opportunities.

At present, the sector contributes a modest 1% to GDP and supports 200 000 jobs mainly in rural communities. However, compliance with the various regulatory frameworks required to develop commercial forestry projects discourages entrepreneurs from entering the industry. These include environmental impact assessments (EIAs), water licences and land reform issues.

A lack of investment in the upgrades of machinery, equipment, investment design skills and the country’s liberal trade regime has stunted the industry’s growth and prompted South Africa to become a net importer of wood products.

StrategyIn 2010, a R20 million forestry development grant was set up to address some of these challenges. The grant has been used to engage IDC’s service providers to proactively source and support the development of community-owned forestry projects. As a result, there has been a remarkable increase in applications to the SBU for funding by community-based enterprises looking to venture into forestry. Another initiative, the Pro-Forestry Scheme, aims to stimulate growth by:

• Reducing the national timber shortage

• Creating additional fi bre resources for increased downstream benefi ciation

• Supporting BEE participation in the forestry sector

• Supporting government initiatives (NIPF, IPAP)

• Supporting the expansion of potential timber resources and timber sector in Africa

The SBU has further approved funding to sawmilling companies, boosting technology advancement within the sector.

The SBU approved distress funding to one of South Africa’s largest furniture manufacturers to save over 5 500 jobs and to improve fi nancial viability while most companies wrestle with a strong Rand and stalling global economic recovery.


Read more The potential for a bio-composites industry in SA



The SBU is focusing on

funding companies that

seek to beneficiate minerals in line with government’s priorities.

The overall fair value of equity investments in the portfolio showed an increase of R473 million. The increase is largely due to investments in the coal sector while the precious metals sector (platinum and diamonds) took off some of the shine. Columbus Stainless Steel saw a R67 million impairment reversal on the back of improving trading conditions in the stainless steel sector. The Kalagadi Manganese sinter mine, in which the IDC holds 10% equity, is being implemented and is expected to come on stream within the next fi nancial year.

Some clients continue to battle headwinds due to current depressed market conditions. This led to an increased impairment fi gure of R54 million for the period under review. Our investments in the platinum, diamond and uranium sectors were the biggest contributors to this fi gure.

In 2012, IDC, the Bakgatla Ba Kgafela community and Pallinghurst Resources announced a multibillion-Rand platinum mining venture called the African Queen. The venture will merge mines in the North West co-owned by the Bakgatla Ba Kgafela and Pallinghurst. Pallinghurst owns 42% of the venture, the Bakgatla 27%, IDC 16%, and the rest of the stake is split among a spread of shareholders. The IDC’s shareholding is equivalent to R3.24 billion in new ordinary shares. On full implementation, the project will create more than 9 000 jobs.

Future focusThe SBU will continue to play a meaningful role in supporting growth of the minerals and benefi ciation sector, particularly in the steel and steel-related industries; providing fi nancial and technical support to junior mining companies, particularly in early-stage development; and exploring opportunities and projects across the rest of Africa, especially those that have demonstrable evidence of linkages with South Africa.

Mining and Mineral BeneficiationOverviewThe mining industry is gradually returning to the pre-recession performance last seen in 2008, with local and Chinese-induced demand proving the main catalyst for recovery. However, infrastructure bottlenecks like the lack of rail and port capacity required to ship volumes to export markets continue to impact negatively on opportunities for growth. In addition, a lack of energy capacity, safety stoppages, labour issues and escalating production costs pose serious threats to the profi tability of the industry, even prompting the mothballing of some mining projects.

While government considers mining to be a key driver of growth in its medium- and long-term job creation targets, the industry needs to play its part in economic empowerment and social transformation. The slow pace in transformation is best illustrated in renewed calls for resource nationalism. As a partner in mining and mineral benefi ciation development, the IDC subscribes to the mining charter. With the highest mineral wealth in the world, worth an estimated US$2.5 trillion, South Africa struggles to pass on the potential benefi t of this sector to all South Africans.

StrategyThe SBU is focusing on funding companies that seek to benefi ciate minerals in line with government’s priorities. Funding of the Kalagadi Manganese sinter mine, Exxaro, African Queen and other projects, demonstrates our commitment to growing and supporting companies with meaningful BEE participation. It is important to note that equity investments in this sector apply to medium- and long-term projects. These take time to execute and generate dividends, straining our balance sheet in the short term, but potentially yielding outstanding long-term returns.

PerformanceThe SBU approved 11 transactions amounting to R3.5 billion in the period under review. Our investment in Umnotho We Sizwe Resources will allow the BEE junior miner to complete the construction of its chrome mine and ramp up production. Sudor Coal will also soon start its expansion project to increase coal production to supply Eskom power stations in Mpumalanga.

More information Sectoral Trends fi rst quarter 2012 www.idc.co.za/IR2012

IDC strives to unlock and benefi ciate South Africa’s mineral wealth.

Phot

o: C

hris

Kirc

hhoff



The SBU approved funding to textile manufacturing company Prilla 2000 (Pty) Limited to invest in a new state-of-the-art cotton spinning plant. The new plant will allow Prilla to increase the quality and throughput of its products. The timing of the investment proved disappointing as international cotton prices soared in excess of 140% while yarn prices remained relatively unchanged.

Yarntex, a greenfi elds project funded by the SBU and established to provide dyeing services to the industry, encountered delays due to transactional complications. The project was set back at least six months.

Following recapitalisation, the IDC became the sole shareholder of Colibri Towelling – renowned for manufacturing high-quality towels. Colibri, guided by a business rescue practitioner, has embarked on a turnaround plan to save 300 jobs.

Future focusThe clothing and footwear sub-sectors remain the focus areas for expansion opportunities. Within the clothing sub-sector specifi cally, the SBU will focus on increasing the industry’s competitiveness by investing in fast fashion (quick turnaround times) and government’s preferential procurement opportunities.

Textiles and ClothingOverviewOnce considered an essential employer in Western Cape and KwaZulu-Natal, the textiles sector continues to experience diffi culty due to the infl ux of cheap imports from the Far East. While more job losses occurred during the 2011/12 fi nancial year, the sector has shed more than 100 000 jobs over the last decade. The IDC remains committed towards the textile and clothing sector as it is key to unlocking job opportunities and sustaining existing employment.

The State-led Designated Preferential Procurement Plan (DPPP) introduced in December 2011 aims to redirect government procurement from international imports to local manufactured items. Furthermore, the recently established National Fashion Council is intended to support local design and its upstream activities. Some local retailers have committed to buying locally-manufactured clothing.

The most signifi cant step towards restoring the industry to its historic production and employment level was a landmark fl exible wage agreement signed in October 2011 between the National Bargaining Council and the South African Textile Workers Union (SACTWU). According to the agreement, employers can off er fl exible wages to new employees on condition that the sector creates at least 5 000 jobs by 2014.

StrategyIn support of government’s eff ort to stem the tide of international imports and increase the competitiveness of the sector locally, the SBU is actively involved in various State-led initiatives to improve the sector’s prospects.

The Textiles and Clothing SBU further off ers support to enterprises across the industry sectors ranging from the production of natural and synthetic fabrics to the manufacturing of home décor, leather goods and clothing.

Performance On behalf of the dti, the IDC’s Development Funds Department administers the Clothing and Textile Competitiveness Improvement Programme (CTCIP), which is beginning to show results with a marked improvement in plant upgrades and capacity expansion projects. In addition, the IDC’s Clothing, Textile, Footwear and Leather Scheme (CTFL) was designed to provide interest-subsidised loans to enterprises in an eff ort to stem further job losses.

In support of government’s eff ort to stem the tide of international imports and increase the competitiveness of the sector locally, the SBU is actively involved in various State-led initiatives to improve the sector’s prospects.


Case study

Cotton Traders Cotton Traders was founded in 1989 in Cape Town. It started in a small building with 30 employees and soon established a reputation as manufacturers of superior bedding products. The products manufactured are primarily fi lled products, utilising natural feather and down materials and synthetic fi bre fi ll comprising micro-fi bre and hollow fi bre. Filled products include home textile items such as duvets, pillows, down blankets, featherbeds, decorator cushions, down-fi lled slippers and mattress protectors. The company also supplies a proprietary brand marketed under the Granny Goose label.

The IDC provided R5.9 million in funding for Cotton Traders to acquire plant and equipment. The funding for the equipment and leasehold improvements qualifi ed under the IDC's Clothing and Textiles Competitiveness Financing Scheme (CTCFS). In addition, a working capital loan was provided to enable the business to take advantage of raw material purchases, owing to extremely favourable purchasing opportunities. The IDC’s fi nancing (and a R1 million grant through the dti’s Clothing and Textiles Competitiveness Improvement Programme (CTCIP)) enabled the company to install an integrated computerised production management system as well as to acquire a 1 000 m2 warehouse in order to re-organise the factory for greater effi ciency.

Despite diffi cult trading conditions for textile products in the South African market, the funding has ensured not only job retention, but has resulted in an overall increase in employment.

Development impactIDC’s intervention is expected to create 50 jobs. The funding will further improve Cotton Traders’ competitiveness through plant modernisation and skills improvement.



Metal, Transport and Machinery ProductsOverviewThe sector has been in distress for the last three years as evident in the number of fi rms seeking distress funding from the IDC. This is mainly due to the weak global economic recovery and lacklustre demand reducing export opportunities for local manufacturers. In addition, South Africa’s strong Rand relative to the Euro and the US Dollar rendered South Africa’s exports less competitive on the international market. However, the uptake in new deal fl ows during the year points to a favourable economic outlook and growing market confi dence.

Strategy The SBU off ers funding and project development support to ferrous and non-ferrous metal-based manufacturing businesses while focusing on specifi c sub-sectors as listed on page 30.

The automotive sector has been a strong contributor to national GDP and local employment opportunities. Currently, the automotive components industry is still dominated by imports, representing an opportunity to expand local manufacturing. The SBU is therefore keen to grow the sector further and invest in its industrialisation. The SBU further supports the dti in its eff orts to grow the local manufacturing of medium and heavy commercial vehicles.

PerformanceThe SBU’s impairment fi gure decreased to 18% from 23% previously.

KLT SA (Pty) Limited Automotive, a subsidiary of the

Mumbai-based KLT group, received funding to construct a new chassis assembly plant able to manufacture 120 000 chassis per year.

The SBU approved a working capital facility to I-Wec, a newly formed wind turbine manufacturer based in the Western Cape to ramp up the manufacturing of wind turbine components.

Future focus Being one of the more mature sectors in which the IDC invests, the sector already boasts reasonably good manufacturing capabilities. The planned capital expenditure earmarked by SOCs will provide further substantial investment opportunities which are expected to grow the economy and boost employment. The SBU is prepared to fund companies that will partake in the SOCs infrastructure development drive.

The development of a greener economy will open up substantial components manufacturing possibilities, which the SBU will actively pursue.

The planned capital expenditure earmarked by State-owned Companies (SOCs) will provide further

substantial investment

opportunities.

Read more An overview of the alternative-fuelled vehicles industry

Read more A strategic overview of SA’s wind energy components industry


Case study

Kearney’s Truck and TrailerKearney’s Truck and Trailer was founded by the Kearney family 14 years ago. It is currently among the top fi ve trailer manufacturers on the continent in terms of both market share and trailer design capability. The main focus of the business is to design, manufacture and supply various sized heavy duty trailer products in the range of 15 to 40 tons to the road freight industry.

Trailer manufacturing is a key sector within the automotive heavy commercial vehicles industry. The company supplies fi ve state-of-the-art or technically advanced variations of these trailers. The business supplies to its key customers such as ABI Group, Eskom Fleet and Mercedes-Benz among many others on its 1 500 customer list within the local and cross-border road freight market. About 10% of its products are for the export market such as Australia, Mongolia and some countries in the Middle East.

Development impactThe automotive sector has been a strong contributor to national GDP. The IDC is committed to investing in the sector and contribute towards the industrialisation of the sector.

The IDC’s fi nancial support to Kearney is expected to contribute towards the creation of 103 jobs and saving the current 93 jobs.



Other notable transactions included the approval of funding to Vektronix that will create 150 jobs in the Eastern Cape. Vektronix established the fi rst TV contract manufacturing plant in South Africa and remains one of the most fl exible, cost-eff ective consumer electronics manufacturers in the country. Vektronix’s favourable position, due to its relationship with Samsung SA, allows it to qualify for other major contracts with Original Equipment Manufacturers. Xuma Technologies (Pty) Limited, a mid-sized 100% black women-owned telecommunication infrastructure business that also received funding from IDC during the period under review, enabling it to successfully execute contracts for MTN, Vodacom and Dark Fibre Africa and, in the process, create 589 jobs.

Future focusThe ICT SBU is set to continue fi nancing traditional ICT, shared services and electronic manufacturing sectors.

In addition, the SBU aims to unlock opportunities that arise from government’s integrated national broadband policy and the regional integration of ICT into the rest of Africa. Projects that focus on last-mile access, decreasing overall broadband costs and increasing penetration into the under-served and rural areas are continually being investigated. This includes facilitating South Africa’s migration from analogue transmission to digital terrestrial broadcasting.

Information and Communication Technologies (ICT)OverviewThe local ICT industry is well poised for recovery following the economic downturn. This is evident in the increasing value of fi nancing approvals. Various medium-term opportunities exist as a result of South Africa’s migration from analogue transmission to digital terrestrial broadcasting and the requirement to increase broadband delivery. Eleven million households will require “set-top box” receivers to view the new digital signal on their analogue television sets. Government intends to provide fi ve million households with subsidies of up to 70% for locally manufactured set-top boxes.

Strategy The World Bank has recently concluded that a 10% increase in broadband penetration rates will result in a 1.3% increase in GDP in developing nations. Therefore, the SBU’s strategic focus will be funding enterprises that will help drive down broadband costs signifi cantly and increase penetration. As regional integration is pertinent to driving costs down, the ICT SBU is exploring mutually benefi cial opportunities within the SADC region. To this eff ect, the IDC approved funding in 2011 to Econet Zimbabwe for its infrastructure expansion project (concluded during the current fi scal year).

Performance Closure of the Public Private Partnership SBU on 1 April 2011 has prompted the transfer of large ICT investments including Broadband Infraco, Neotel, New Dawn Satellite to the ICT SBU. The committed ICT SBU portfolio is now over R4.6 billion. Given the equity nature of some of the investments in the portfolio, a number of associated impairments were raised. However, the overall impairments as a percentage of outstanding book shows a reducing trend. The SBU approved funding to Conduct Telecommunications, a start-up company with fi rst-mover advantage in the provision of open-access “last-mile” connectivity to end-users, to facilitate the reduction of broadband costs.

The SBU aims to unlock opportunities that decrease overall

broadband costs and

increase penetration

in the under-served

and rural areas.


Case study

Xuma TechnologiesXuma Technologies was established in 2004 by two sisters, Bongiwe and Boitumelo Mkonza. The company is a 100% black women-owned and managed business that off ers a number of telecommunication infrastructure services.

The IDC provided working capital to Xuma

Technologies for the business’ expansion. This was

needed for a major contract for Dark Fibre Africa, which plans to roll out 15 000km of fi bre cables over three years. The company qualifi ed for the funding through the Women Entrepreneurial Fund off ered by the IDC to promote the development of female entrepreneurs. The involvement with the IDC came after the company won the Gauteng Enterprise Propeller SMME Award in 2010.

Development impactThe laying of fi bre-optic cable for network operators and municipalities is set to reduce the cost of broadband and communications services in South Africa. The company is expected to create 589 jobs.

Xuma Technologies contracts to network operators and owners to lay terrestrial fi bre cable, conducting both the civil portion of the duct roll out, as well as the blowing and splicing of the fi bre cables into the ducts. This capability means the company can attract major and long-term construction contracts, with the necessary capital requirements.


HealthcareOverviewThe public healthcare sector of South Africa continues to lack appropriate impact at ground level. Part of government’s healthcare reform plans places strong emphasis on local procurement. Healthcare facilities will have to source around 70% of medical products from local manufacturers.

StrategyTo facilitate more local procurement within the sector, the Healthcare SBU is proactively exploring opportunities to fund companies looking to break into the manufacturing space. The SBU continued to provide funding and business support to a wide range of sub-sectors within the value chain. These included manufacturers of pharmaceuticals, medical devices and the building of hospitals in previously under-serviced areas.

However, the SBU is anticipating new directives from government in line with the recently released National Health Insurance (NHI) green paper. The outcomes will impact on the SBU’s strategy going forward.

Performance In the period under review, the IDC approved funding for the Botshilu Private Hospital to establish a 100-bed hospital facility in Soshanguve, Gauteng. Botshilu will cater for the specifi c needs of women and children, including pre-natal and post-natal medical services to the surrounding population of 500 000 people. The project will create 380 permanent jobs and an annual equivalent of 213 jobs during the construction phase.

The SBU further approved a guarantee for an overdraft to Biodelta (Pty) Limited, a pharmaceutical manufacturing plant in the Western Cape that supplies local and export

markets. In the SBU’s fi rst Public Private Partnership (PPP) transaction, it provided funding to Clinix-Phalaborwa Private Hospital (Pty) Limited to refurbish and expand its 62-bed healthcare facility in Phalaborwa. Clinix-Phalaborwa Private Hospital (Pty) Limited entered into a PPP agreement with the Limpopo Provincial Health and Social Development Department to operate the facility.

Future focusThe SBU is expected to play a critical role in the next fi ve years assisting government with the implementation of the NHI. The fi rst phase prioritises the upgrade and expansion of hospital infrastructure, strengthening HIV and AIDS treatment and prevention programmes and expanding healthcare professional training.

The large capital outlay required to overhaul the existing healthcare infrastructure provides the SBU with various funding opportunities. Furthermore, boosting local manufacturing of anti-retroviral active ingredients will reduce the country’s dependence on imports while also securing South Africa’s supply of priority drugs.

Boosting local manufacturing of ARV APIs will reduce the country’s dependence on imports while also securing South Africa’s supply of priority drugs.



Read more The relevance of the bio-technology industry to SA’s healthcare sector


Case study

Pharma QPharma Q (Pty) Limited, a pharmaceutical plant previously owned by Adcock Ingram and Wyeth SA, is a wholly-owned subsidiary of Pharma Q Holdings (Pty) Limited. Presently the company is predominantly a contract manufacturer; however, concomitant with the upgrade, the company will be able to manufacture its own products and allow for export opportunities. This will increase South Africa’s pharmaceutical manufacturing capacity and capability. Pharma Q has an established track record in manufacturing expertise and currently produces 500 Medicines Controls Council (MCC) approved products. They service 30 leading global pharmaceutical companies for a diverse range of products and brands including Bayer (Pty) Limited, Pfi zer Laboratories and Reckitt Benckiser.

Development impactPharma Q has been funded by the IDC to upgrade and modify the plant in accordance with the Pharmaceutical Inspection Co-operation Scheme (PICS) standard by the industry regulator, the Medicines Controls Council (MCC). The funding will save 395 permanent jobs and 133 temporary jobs and will in addition create 45 new direct permanent jobs through the upgrade of the manufacturing plant.




Media and Motion PicturesOverviewSouth Africa has a vibrant, growing fi lm industry that is fast gaining recognition on the global stage. Foreign fi lmmakers are taking advantage of the country's diverse, unique locations – as well as low production costs and favourable exchange rate, which in some cases make it up to 40% cheaper to produce a fi lm in South Africa than in Europe or the US and up to 20% cheaper than in Australia. In addition, South Africa’ unique location, tourism hotspots and attractive landscape have been key to marketing the potential of the local fi lm industry.

StrategyThe Media SBU invests in the production of motion pictures as our primary strategy to develop a sustainable local fi lm industry, while also funding media projects that strengthen the entire value chain. The development of digital cinemas in townships, through pilot projects in Soweto, provides facilities that are sorely lacking, while also giving access to digital media resources to the masses.

PerformanceInvestments in the local fi lm industry led to the production of the acclaimed fi lm Semi-Soet in 2011, a romantic comedy that grossed more than R9 million at the box offi ce. The SBU further invested in Zambezia, the fi rst locally produced animated 3D feature fi lm as well as Long Walk to Freedom, a fi lm currently in production and based on the biography of former President Nelson Mandela.

With Cape Town fast becoming a preferred destination for foreign movie producers looking to reduce the budget costs for their blockbusters, the Media SBU invested in the Cape Film Studio to strengthen the Western Cape’s growing motion picture value chain. Our media investment’s fair value has reduced, driven primarily by impairments in media companies battling to sustain their revenue momentum. There has not been a major gain recorded in long-term job creation as fi lms generally create only temporary jobs.

Future focusThe SBU will continue to fund the production of high-quality fi lms.

Investments in the local fi lm industry led to the production of the acclaimed fi lm Semi-Soet in 2011,

a romantic comedy

that grossed more

than R9 million at

the box offi ce.

Read more The need for continued IDC involvement within the fi lm industry


TourismOverviewGrowth in the tourism industry has been tepid due to the lack of discretionary expenditure amongst potential tourists, notably from the Euro zone. Consequently, this has put pressure on an industry battling an over-supply of bed capacity since the 2010 FIFA World Cup™.

Despite the industry’s dismal outlook, government recognises tourism as a key job creation sector within the New Growth Path (NGP). The industry accounts for 8.6% of South Africa’s gross domestic product (GDP) (direct and indirect) with an estimated 1.2 million people working in tourism-related jobs.

StrategyThese challenges have prompted our Tourism SBU to shift focus towards investing in niche opportunities within undeveloped regions across the country. The tourism SBU has aligned its strategy with that of the National Department of Tourism’s National Tourism Sector Strategy (NTSS).

PerformanceThe SBU approved R91.5 million to partially fund a 122-room three-star hotel in Newlands, Cape Town. The hotel will be operated by the Rezidor group under its Park Inn brand targeting corporate clients while catering fully for the needs of the disabled. In the long term, the business will provide Deaf SA, a co-shareholder, with a commercial income stream to alleviate the organisation’s reliance on government subsidies.

IDC approved funding of R18.2 million for a much-needed 80-room limited service hotel in Kathu, Northern Cape, in which the Sishen Iron Ore Community Development Trust will own a 51% shareholding. This investment is expected to create 88 jobs.

The SBU approved a R2.25 million loan facility to Transfrontier Parks Destination (Pty) Limited to operate Witsieshoek Lodge owned by the Batlokoa community in the Free State. The company has a 25-year lease agreement to manage and operate the lodge on behalf of the Batlokoa community. Other projects that received funding from the IDC include Shepherds Tree, a game lodge in the North West, and Mambedi Lodge in Limpopo.

Nation-wide occupancy fi gures have dropped to historic levels prompting a surge in impairments to 12% of our total tourism exposure. Auspex Hotel and Leisure (Pty) Limited, a 173-room fi ve-star hotel in Port Elizabeth, in which the IDC holds 30% equity, is the worst-hit by hostile trading conditions.

Future focusWindtown SA, a kite-surfi ng facility in Langebaan in the Western Cape, is set to come on stream towards the end of calendar 2012. Nonoti, a luxury multi-product resort in the iLembe district, KwaZulu-Natal, is still at the inception stage, but remains one of the key future projects in the pipeline. Beyond South Africa, the IDC is exploring opportunities for business hotels in East and West Africa and has identifi ed a great need for new hotels and the refurbishment of existing properties.

The industry accounts for 8.6% of South Africa’s gross domestic product (GDP) (direct

and indirect) with an

estimated 1.2 million

people working in

tourism-related jobs. Read more An overview of SA’s tourism sector

More information The business hotel industry in select East and West African countries,www.idc.co.za/IR2012



Agency Development and SupportThe Agency Development and Support (ADS) Department is responsible for facilitating funding and support for local economic development. A key element of the department achieving the above is the creation of a conducive local environment, mobilising investment and activity that can create sustainable employment opportunities.

ADS focus areas are:• Supporting existing local and regional development

agencies

• Support and promotion of social enterprises

• Strategic interventions to address spatial disparities

• Manage Local Economic Development (LED) grant funding on behalf of the dti1

• Oversight and support function in respect of managing the above

1 These investments are indicated as catalytic projects in the map below.

ADS’s ProgrammesAgenciesADS was launched in 2002 to fund and support the establishment of municipal development agencies. The intention was to introduce capacity and resources for the often under-funded yet critical LED project development programmes of local government and to ensure their implementation. This is done through the funding of local economic development agencies of which the ADS has 34 in its portfolio. Thirteen agencies are currently dormant (non-performing) or closed due to a variety of reasons including political changes in councils, capacity constraints and boundary consolidations, etc.

Given the challenges facing development in outlying rural areas, further funding of R27 million was approved (actual spend R21 million) in 2011/12 for nine development agencies to expand their work in developing and packaging appropriate projects for these regions.

Special Interventions

Catalytic Projects

Operational Agencies

Agency development activity in South Africa

LA


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As a grant-making department, our clients require additional funds to implement their programmes. To this end, they leveraged approximately R265 million, mainly from the public sector in 2011/12, and have leveraged in excess of R1.6 billion over the course of the programme. This means that, on average, each rand invested by the IDC in an agency grew nine fold.

These funds were used for the implementation of various projects including out-grower support, agriculture development, airport revitalisation urban renewal, SME support-centres and project management fees.

Spatial interventions LA

Many communities are characterised by market failures and markets working sub-optimally outside the larger, more formal and established urban centres. As their economic development falls further behind, so their specifi c hardships, unequal development and levels of poverty increase, requiring a direct and focused intervention to improve their economic circumstances and prospects.

The over-arching aim of this programme is to allow the IDC to intervene eff ectively to address the socio-economic and developmental needs of a particular targeted area. In 2011/12, three programmes totalling R4.4 million were approved, of which R2.4 million was leveraged from the dti. R18 million will be rolled out in the next fi nancial year.

Social enterprisesADS is preparing to establish a programme aimed at supporting social enterprises where they exhibit the potential to provide opportunities for job creation, developmental impact and economic growth, as acknowledged in the New Growth Path.

We defi ne a Social Enterprise (SE) as an entity which:

• Addresses, as its primary purpose, social and environmental issues and the creation of social value

• Uses business principles to create, build and maintain social value

• Has a long-term strategy to work towards self-sustainability (with at least 50% operating costs recovered from revenue generation through its own trading)

• Re-invests a majority of its revenue into the business to ensure a larger social impact

An amount of R12 million has been approved to roll out a pilot programme, in the next fi nancial year. We look forward to contributing to the elevation of this important sector of the economy in the years ahead.



Development fundsThe Development Funds Department (DFD) provides funding support to projects that have a high development impact. It achieves this by managing higher risk-taking funds and disbursing these funds into deserving projects.

DFD manages IDC ring-fenced and third party funds which are allocated to development needs not typically addressed through the standard IDC funding mechanism. The funding schemes support the aims of the New Growth Path (NGP) set out by the Economic Development Department (EDD), which emphasises technological innovation, growth, employment creation and equity.

Funding methodsThe capital is deployed against strict investment guidelines towards addressing a specifi ed, targeted developmental need. A variety of tools such as softer pricing, structuring terms and relaxation of fi nancial and other norms are used to meet the objectives of the scheme. The capital may be off -balance sheet or on-balance sheet funds. Many of the investment funds under management, being fairly new funds that will not reach maturity in the short term, are diffi cult to assess for fi nancial sustainability. The funds provide varying degrees of non-fi nancial support through funding shop-fl oor training and upskilling, mentorship and coaching at employee level and management.

This promotes empowerment and sustainable industrial capacity. In the period under review, a signifi cant number of funds have migrated to the IDC SAP system while other funds are largely in the process of being migrated. This migration will be completed in the early part of the 2012/13 fi nancial year. This will assist in improving turnaround times and communication to clients, tracking of information and improved portfolio reporting to stakeholders.

DFD manages IDC ring-fenced and third party funds which are allocated to

development needs

not typically addressed

through the standard

IDC funding mechanism.


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Summary of development funds managed

Fund Purpose Instrument Size of fund

Amount committedsince inception

of fund as at31 March 2012

Cross-sectoral funds1 Unemployment Insurance Fund

(UIF)Assist companies that save and/or create jobs at < or = R450 000 per job

Loan R4bn R2.4bn

2 Gro-e Assist companies that create jobs at < or = R500 000 per job

Loan/Equity R10bn R1.9bn

3 Women Entrepreneurial Fund (WEF)

Assist female entrepreneurs to start or expand their businesses

Loan/Equity R300m R49.5m

4 People With Disability Fund (PDF) Assist entrepreneurs with disabilities to start or expand their businesses or to acquire businesses


5 Development Fund (DF) Assist workers to acquire meaningful stakes in IDC-funded transactions

Equity/Quasi R350m R202.2m

6 Community Fund (CF) Assist marginalised poor communities to acquire meaningful stakes in IDC-funded transactions


7 Equity Contribution Fund (ECF) Assist new-entrant black entrepreneurs with their equity contributions with regard to IDC funding requirements


8 Risk Capital Facility (RCF) Assist with equity-type funding to BEE-SMEs that create jobs

Equity/Quasi R841m R624m

9 Technology Venture Capital (TVC) Commercialisation of innovative products, processes and technologies


Industry/sector-specifi c funds10 Agro-Processing Linkages

Scheme (APLS)Promote agro-processing and rural development by linking established agro-processors with resource- poor farmers

Loan/Equity R100m R28m

11 Agro-Processing Competitiveness Fund (APCF)

Facilitate increased competition, growth and development in agro-processing sector through provision of fi nance to non-dominant players

Loan/Equity R250m R69m

12 Clothing and Textiles Competitiveness Programme (CTCP)

To improve the competitiveness of the local clothing and textiles sector

12.1 Clothing and Textiles Competitiveness Improvement Programme

Improve product, processes and people on a cluster basis

Grant R181m R147.6m

12.2 Production Incentive Programme Funding provided to individual companies for plant and equipment upgrade

Grant R2.5bn R1.2bn

Note* All the funds are on-balance sheet except the APCF, CTCP, RCF and TVC.



Exposure in the rest of AfricaThe IDC has been operating on the continent outside SA’s borders since 1998. In the 10-year period from 2001 to 2010, the Corporation approved an estimated R20.1 billion in funding in respect of projects in the rest of the continent.

Our exposure to the rest of Africa stood at R6.2 billion (at cost) on 31 March 2012, representing 41 projects in 17 African countries. The bulk of the approvals continues to revolve around:

• Mining

• Industrial infrastructure

• Agro-processing

• Tourism (mainly hotels)

The Mozambique Aluminium Smelter, Mozal, which was the fi rst IDC project outside South Africa, continues to be the fl agship project in IDC’s rest of Africa portfolio.

A high level of cancellations and delayed draw-downs of approved funding (around 25% of approved funding not invested) remains a disappointment, especially in light of the substantial resources dedicated to project assessments. Furthermore, the low level of funding activity in the rest of Africa in the past fi nancial year has not contributed to IDC’s aim of achieving a greater regional footprint and developmental impact on the continent. This will require more substantial proactive project development.

IDC’s footprint in project development in the rest of Africa

Tourism

Infrastructure

Manufacturing

Franchising

Mining

Financial services

Transport, logistics and storage

Healthcare

ICT

Agriculture and agro-processing

Energy

ICT

ICT

ICT



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Investing in our customers

OverviewCustomer service is one of our core strategic pillars. We invest in enterprises run by individuals. Consequently, our business revolves around our clients. How we serve and support them plays a fundamental role in their ability to deliver the impact we demand.

We endeavour to be innovative and proactive in providing our customers with valuable services.

InnovationWe believe innovation plays an important role in ensuring that we evolve and continually adjust to our clients’ changing needs. To improve the quality of IDC’s customer service and entrench innovative thinking into IDC’s culture, we implemented a number of initiatives aimed at generating ideas from within.

Our employees generated approximately 283 new ideas, 30% of which related directly to how we can improve our internal processes and systems to serve our clients more effi ciently. Of the ideas received, the following noteworthy changes have already been implemented:

• Potential clients can now apply for funding online via the IDC direct website. The service went live on 15 March 2012. We hope this service will not only make the submission of applications easier and faster, but also help streamline the whole application process

• Open Innovation is based on the premise that good ideas also come from external sources. We launched our Open Innovation website on 21 February 2012 together with the launch of our Masters of Business Administration (MBA) competition. The MBA competition was launched with the University of Free State’s Business School. We hope to partner with other business schools to roll out competition country-wide

With the MBA competition, we seek to tap into the great ideas and business plans of South Africa’s young entrepreneurs and seasoned business community. We foresee Open Innovation as a critical source of good ideas to improve our services as well as a tool to fi nd solutions to some of the challenges the IDC and the country faces.

Business supportExisting IDC clients in distress or facing growth challenges are referred to our Business Support Programme (BSP). The BSP engages management consultants and industry experts to provide professional services, advice, guidance and mentoring to our clients. We generally provide grant funding to these clients and share in the cost of engaging external business consultants.

Furthermore, BSP assists our prospective clients looking to improve their business plans to meet our fi nancing criteria before they apply for funding from us.

The Business Support function is decentralised nationally through IDC regional offi ces and satellite branches, to ensure an extended reach. Highlights for the year under review include:

• A record number of business support approvals (67) for a total value of R20 million, which includes R11.4 million in IDC grant funding (actual disbursement R6 million) LA

• The approval of a community investment policy

• The roll out of new business support products

• The addition of B-BBEE verifi cation functionality to the programme

Capacity buildingOur Capacity Building department develops the business capacity of some of our business partners and clients.

The department also engages with various other DFIs all over the continent on matters relating to capacity building and develops benchmarks for good practices within the development fi nance domain. Through co-ordinating our eff orts, by signing Memorandums of Understanding (MoUs) between IDC and other DFIs, we are able to facilitate training to improve the expertise not only of our own employees, but also our business partners and clients.

In the period under review, IDC’s Executive Committee approved 26 MoUs with other development organisations. These generally include agreements on co-funding projects, the provision of credit lines, the exchange of vital operational information and knowledge. The MoUs guide our engagement with other DFIs and are crafted to cater for the specifi c needs of each particular DFI.

This co-operative approach enables us to leverage the resources of other DFIs to increase our reach and development impact, especially in rural areas.


Investing in our customers (continued)

Client monitoringPost Investment MonitoringOur Post Investment Monitoring Department (PIMD) becomes involved subsequent to the approval of any type of funding. PIMD proactively monitors all IDC loans, guarantees, quasi-equity and equity investments on a continual basis to ascertain the quality of our clients’ book and identify early warning signs of deterioration. This ensures that we are able to take timeous action to protect our interests and prevent, or at least limit, any fi nancial losses from occurring. PIMD’s monitoring activities include:

• The receipt and analysis of client fi nancial statements. The analysis consists of: comparing statements against the approved projections as provided at the time of fund approval; and verifying adherence to pre-determined covenants, undertakings and milestones as per the funding agreement

• Regular meetings of our Investment Monitoring Committees (IMCs), namely the Equity IMC and Loans IMC, monitor the performance of IDC’s equity, quasi-equity and loan investments and guarantees and decide on the appropriate course of action to be taken with regard to non-performing or potentially non-performing clients. The IMCs are also responsible for reviewing and raising impairments timeously

• Conducting annual business reviews. Clients with high-risk profi les are prioritised and challenges identifi ed and timeously addressed. Intervention may include recommending Business Support as discussed on page 61

• Where rightfully able to, and deemed necessary, we will appoint a director to serve on a client’s board and board committees to protect our rights as an equity investor

• Monitoring whether the intended developmental (job creation, B-BBEE, capital expenditure) outcomes of IDC funding are achieved

• Assessing whether IDC’s funds have been applied for the intended purpose

Ailing companies are transferred to our Workout and Restructuring Department to develop turnaround solutions and assist in the recovery phase.

Workout and RestructuringCompanies identifi ed by PIMD as being at risk of fi nancial distress are referred to our Workout and Restructuring Department (W&R). W&R assists partners in distress by crafting turnaround solutions to save jobs and develop sustainable businesses. Where required, W&R also assists the Legal department with recoveries when businesses fail.

The book value of clients at W&R stands at R5.8 billion, an increase of 16% over the past 12 months. This represents 16% of IDC’s total book. The increase since 2008 can be attributed to the world-wide economic recession which takes time to impact on business to such an extent that they require assistance from our W&R unit. Additionally, rising competition in local markets as international businesses expand into Africa further strain local businesses.


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(Ran

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31 March 2009 31 March 2010 31 March 2011 31 March 2012100

150

200

250

300

350

2 000

3 000

4 000

5 000

6 000

Number of clients at W&R Value of clients at W&R

Workout and Restructuring: Book movement


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W&R has transferred seven clients back to PIMD during this fi scal period after turnaround solutions proved fruitful.

Although our Franchising SBU has been phased out, W&R still continues to assist 60 distressed clients from this former SBU. Of more serious concern is the R3.2 billion exposure we have in distressed business within the Textiles, Mining and Chemical SBUs. This proves how diffi cult the operating environment is in these local sectors.

B-BBEE fundingIDC’s approach to Broad-Based Black Economic Empowerment (B-BBEE) continues to evolve as we take into consideration the legislative changes over the last few years and the development needs of South Africa as captured in the NGP and IPAP. With these requirements in mind we adjusted our funding policy, aff ecting not only all new fi nancing activities, but also our existing investment portfolio.

In order to address the challenges of job creation, economic development and equity it is important to include the whole population in the economy. It is therefore our aim to incorporate black economic empowerment into our mainstream industrial development activities. We therefore support black entrepreneurs to start new enterprises and expand from small to medium or large businesses. Where projects require equity injections for new capacity, we also support black managers, workers and communities to acquire a stake in the business. In line with government policy we apply the B-BBEE Codes of Good Practice to our client assessments. We require new clients to obtain ratings and improve their ratings if there are shortcomings.

During the year under review, the IDC fi nanced 105 black empowered companies amounting to R5 596 million (companies with a black shareholding of more than 25%).

Recognising that certain groupings in the economy have been historically excluded from full participation, IDC pursues economic empowerment initiatives. As such the IDC has the Transformation and Entrepreneurial Scheme (TES) fund focused specifi cally on women, disabled persons, communities and development funding. This is in line with the groupings identifi ed in the B-BBEE codes of good practice and the funding is specifi cally directed to address access to economic opportunities through funding of these excluded groups.

Preferential procurement LA

The IDC is committed to promoting economic growth through the advancement of preferential procurement from black business and the promotion of local production as per the approved IDC procurement policy. Spend with locally-based suppliers refers to all discretionary procurement expenditure facilitated through the IDC Procurement Department with suppliers of materials, products and services operating within South Africa. B-BBEE spend is further measured in terms of the recognition levels of IDC suppliers in line with the approved dti Codes of Good Practice.

The IDC is a level 2 B-BBEE contributor based on an independent review undertaken by an accredited rating agency. In terms of local spending, more than 98% (R198 million) of all open tenders approved by the IDC during the fi nancial year were awarded to locally-based suppliers.

The IDC’s Procurement Department is also focused on developing and implementing strategies to improve procurement processes. These are aimed at promoting black business in a manner that is fair, equitable, transparent and cost eff ective. Supplier development will be a focus area during the next fi nancial year and the IDC has already implemented a supplier performance management system.

Environmental impactsWe expect our clients and business partners to carry out their business activities in an environmental and socially responsible manner. Our environmental policy and environmental and social framework provide the basis for ensuring compliance. The legal agreements we sign with clients incorporate environmental and social aspects.

Our Environmental, Health and Safety Department (EHS) conducts annual environmental and social performance audits on our clients. EHS’s main objective is to identify any potential environmental, health and safety risks and to determine IDC’s level of exposure to these risks. These include reputational risk and liabilities, non-compliance with legislative and regulatory requirements.

A total of 29 clients were audited during the period under review, 82% of whom exhibited acceptable performance. Non-compliant clients are assisted until satisfactory performance is achieved.



Investingin people

Attract andretain talent

Enable change and

transformation

Develop and support talent

Grow and deploy talent

Investing in our people

Skilled and experienced talent operating within a high-performance culture is vital to IDC’s continued success. Only by investing in our employees will we be able to achieve our industrial development objectives. Entrenching innovation and focusing on delivering sustainable solutions is part of our talent management strategy.

This diagram outlines our approach in investing in our employees.

Strategy Progress this year Future priorities

Attract and retain talent

Approved and started implementing our leadership assessment strategy

Approved our employee value proposition framework to improve our status as an employer of choice

Procured an electronic recruitment system to streamline our recruitment process

Approved our improved employee recognition scheme

Continue with the implementation of our employee value proposition

Roll out our competency assessment to improve our ability to appoint the right talent

Implement a workforce planning system to manage the demand and supply of talent

Continue with our employee recognition scheme

Develop and support talent

Implemented our customised leadership development initiative

Implemented our team eff ectiveness initiative to strengthen IDC’s team-based culture and teamwork capabilities

92 members of staff are supported with their studies, 88% of whom are equity candidates

Implementation and facilitation of talent management development platforms (e.g. secondments, ladders of learning)

Provision of tailored and needs-based management and leadership development programmes

Embed the outcomes of the quantum leadership journey

Continue to embed our team eff ectiveness initiative

Grow and deploy talent

Implemented our talent management strategy to identify high potential staff (HIPOs) and potential successors

Implemented an annual employee engagement measurement process across the business

Approved plans to re-align our knowledge management strategy

Implemented core operational skills training via our IDC Academy:

• 22 trainees completed the academy programme

Development of young talent:

• 284 external bursaries awarded, 86% of which were equity candidates

• 18 learnership/internships registered

Implement competency assessment for HIPOs and potential successors

Implement a customised development programme for HIPOs and successors

Defi ne and implement employee engagement action plans to enhance employee retention and our high-performance culture

Continue to measure employee engagement levels

Implement focused knowledge management outcomes in the core business (operations) to share and retain knowledge

Enable change and transformation

Diversity management programme approved for implementation

Implemented a programme to develop our managers’ and leaders’ change management capabilities

Ongoing health and wellness support to our employees through our comprehensive wellness programme

Implement our customised diversity awareness initiatives

Continue with the implementation of our employment equity plan

Continue to build the leadership and management capabilities of our managers and leaders

Continue with the implementation of our wellness programme


Inve

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Male

Num

ber

0

20

40

60

80

100

120

Foreign national

WhiteIndianColouredAfrican

ManagementAdministrationSupport

Heads and championsProfessionalsExecutive management

Female

0

20

40

60

80

100

Foreign national

WhiteIndianColouredAfrican

ManagementAdministrationSupport

Heads and championsProfessionalsExecutive management

Num

ber

IDC staff profi le: 31 March 2012 Overall employment equity: 31 March 2010

Staff profi le: 31 March 2012 – Males Staff profi le: 31 March 2012 – Females

New employees:1 April 2011 to 31 March 2012 LA Employment terminations: 1 April 2011 to 31 March 2012 LA

White female18%African female

Females

63%

Coloured femaleIndian female 9%

10%White male Indian maleColoured male

African male

Males

24%10%

6%

60%

Male:Female ratio – 49:51

EquityNon-equity

88%12%

0

10

20

30

40

50

60

MaleFemale>5030-50<30

Num

ber

Rate

s of

new

em

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Number NumberRates

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

Age Gender

05

101520253035404550

MaleFemale>5030-50<300.000

0.010

0.020

0.030

0.040

0.050

0.060

Num

ber

Turn

over

rate

Number NumberRates

Age Gender


Investing in our people (continued)


Total IDCActual end

March 2012Actual end

March 2011Actual end

March 2010

Employees at start of period 739 693 632

Recruitment 88 87 101

Resignations (46) (35) (35)

Deaths (1) (2) 0

Retirements (9) (2) 0

Dismissals (1) (2) (4)

Contract terminated 0 0 (1)

Total employees at end of period* 770 739 693

* All employees based in South Africa.

Employment EquityIDC management executes our employment equity plan which details our employment equity targets down to business unit level taking into consideration each unit’s business priorities and skill requirements. The plan also has specifi c action plans to address areas for improvement and to ensure that we sustain our conducive working environment

Overall staff turnoverOur full-time employee turnover rate stood at 7.6% for the period under review. The average turnover rate over the last three years was 6.7%. This compares very favourably to the average market rate of 13.6% according to PricewaterhouseCoopers’ Salary and Movement Survey in March 2012.

DisabilityAt the IDC, 1% of our employees are disabled with the majority (0.86%) being black employees with disabilities. This is above the national norm of 0.8% as reported by the Employment Equity Commission in 2010.

We developed a number of initiatives to promote a culture that embraces diversity. Initiatives include the provision of fi nancial assistance to accommodate the needs of employees with disabilities, implement a Disability Disclosure protocol and collaborate with associations that work with disabled people to attract talented individuals.

Grow and deploy talentEmployee engagementIn 2011/12 we embarked on a new initiative to track our employee satisfaction levels. We conducted our fi rst annual employee satisfaction survey through an independent external party. The survey will form the basis of our endeavours to create and maintain a high performance culture within IDC by highlighting areas where the business is doing well and areas where we can improve. It also gives employees the opportunity to share experiences, views and ideas that could enhance our performance at individual, team and corporate level.

69% of staff participated in the survey. Our Employee Engagement Index score for 2011 was 76% against the South African High Performance Norm of 75%. The survey measured key drivers such as overall employee engagement and performance on specifi c drivers such as leadership, strategy, innovation, talent and achievement. Although the survey was mostly positive, various areas for improvement have been identifi ed and will be addressed during the course of 2012.

By cascading the results down to divisional level, we are able to address those issues unique to a specifi c division. Employees are not only involved in identifying areas for improvement but to also participate in fi nding and implementing solutions. The survey will be conducted over the next three years in order to measure progress and improvement.


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Internal health and safety managementTo ensure a safe working environment for employees, visitors and contractors, we have developed a series of health and safety policies, procedures and systems. Our Occupational Health and Safety Committee together with its First Aid and Fire Marshall sub-committees monitor and manage all aspects pertaining to health and safety within the organisation.

We conduct regular health and safety awareness campaigns and training to ensure employees and contractors are well aware of our health and safety policies and procedures.

Our latest internal health and safety compliance audit highlighted a few minor issues that have since been rectifi ed.

Socio-economic developmentOur Socio-economic Development department (SED) focuses on engaging consultants with legal expertise to assist selected benefi ciaries to set up trusts and co-operatives. The benefi ciaries can then use these legal entities to take ownership or become shareholders of organisations through IDC-funded transactions. Furthermore, where the benefi ciaries are local communities, IDC will provide grant funding for training the trustees and members to improve their management skills. This ultimately ensures that their legal entities are managed eff ectively.

SED was involved in at least 33 Green Industry SBU transactions that required community ownership in renewable energy projects. Upon implementation and maturity of the projects, it is expected that the communities will receive signifi cant dividends from profi ts generated by projects. The communities are expected to utilise the proceeds to implement community projects that were identifi ed during the application for fi nance phase. It is expected that these projects will result in further job opportunities for local community members.

Employee health and wellness programmeIDC’s Employee Wellness Programme (EWP) is designed to enhance employee health and wellness through the prevention, identifi cation and resolution of personal and family problems. The IDC has partnered ICAS Southern Africa to provide the service to our employees and their immediate family members.

The EWP reported a 43% utilisation rate which shows that our staff are getting value from the programme. Some of the issues addressed include:

• Emotional (stress, depression, anxiety)

• Family and relationships

• Alcohol and drug problems

• Financial and legal counselling

• Health and bereavement counselling

• HIV and AIDS counselling and support services

In addition, a 24-hour multilingual, toll-free help line is in place to provide emergency consultations at any time of day or night for members.

Other wellness initiatives include HIV and AIDS Awareness and Support Programme, Voluntary Counselling and Testing (VCT), a healthy lifestyle programme to encourage healthy eating and exercising and Wellness Day. The latter aff ords staff the opportunity to participate in health tests and assessments. Staff participation in these initiatives has grown every year with close to 50% of employees participating in these initiatives.

Employee medical programmeThis programme provides annual medical screening to encourage our employees to live healthily.





Develop and support our peopleLearning and developmentWe invested R18.1 million in learning and development activities. This represents 3.3% of our total salary bill for the period under review and, on average, our full-time employees received 11.2 training hours per employee.

Skills development summary 2012 2011 2010

Number of employees trained 739 706 527Black employees as a % of employees trained 80% 78% 79%

Skills development summary per occupational level:

A B

and

S Ba

nd

P Ba

nd

M B

and

E Ba

nd

Aver

age

per

empl

oyee

Female (384)

Total in days 190.5 5.5 222.7 120 5.5 1.4

Total in hours 1 524 44 1 782 960 44 11.3

Male (355)

Total in days 45.3 0 206.3 236 10 1.4

Total in hours 362 0 1 650 1 888 80 11.2

* A Band is administrative; S Band is support; P Band is professional;M Band is management; E band is executive.

IDC AcademyThe Academy focuses on developing IDC’s deal-making capabilities including the evaluation of business proposals during due diligence investigations. A summary of the Academy’s progress over the last three years is provided below:

IDC Academy 2012 2011 2010Number of trainees in academy registered 20 9 26

Number of trainees in academy completed 22 14 24

We provided targeted training on project initiation and development as well as on due diligence to our employees. We also worked hard to prepare due diligence team leaders to ensure our new corporate strategy is eff ectively executed. A summary of these training activities is provided below:

Number of participants 2012 2011 2010

Academy – Business Analysts 20 9 26Operational employees 86 202 150

Total trained 106 211 176

Talent management and successionAll employees receive performance reviews and 89% of employees completed career reviews.

We have identifi ed the key positions which are critical to drive the IDC strategy. To ensure that there is suffi cient talent available for these critical roles, we have developed tailored succession plans and identifi ed High Potential staff (HIPOs) and potential successors. These individuals will receive focused development to prepare them for these leadership roles. Their development depends on the level of readiness which could range from being:

• Immediately ready to function at a higher level or in a more complex role

• Ready in the next one to three years

• Ready in three years or more

Our Leadership Competency Assessment programme enables us to determine the development needs within our senior management team and undertake initiatives to address these needs.

Focus on leadershipWe recognise that quality leadership and strong management skills are vital to ensure that we make prudent investment decisions and provide clients with proper business guidance. Our leadership development strategy aims to enhance managerial and leadership capabilities and ensure that we develop a pipeline of talented individuals able to lead the business in the future.

A total of 135 managers and executives from all levels of the business participated in a customised Management and Leadership programme known as the Quantum Leadership Journey.

Remuneration policyThe IDC’s remuneration policy is focused on recognition of well performing employees to increase morale and maintain loyalty amongst staff . The custodian of the policy ultimately is the Divisional Executive: Human Capital although the eff ectiveness of the policy is dependent on the implementation which is reliant on the involvement of Department Heads and the Human Capital Division.

In addition to ensuring that the IDC attracts and remunerates appropriately qualifi ed employees, the policy gives clarity on matters of remuneration, promotion and increases. The policy also provides guidance on the performance incentive scheme, job evaluation and promotions. In addition to the policy, the IDC benchmarks itself annually against other employers and participates in remuneration surveys.


Corporate Social InvestmentOur Corporate Social Investment (CSI) activities are primarily directed towards education, economic development and healthcare.

Our total spend on CSI for the period under review was R18.9 million. LA

For more details regarding our future CSI investment strategy, please refer to “The way forward” on page 70.

EducationImproving the level and quality of education in South Africa is of prime importance to the country’s future as a developing nation. South Africa’s development is increasingly hampered by the shortages of scarce skills.

To address these issues, the Department of Basic Education initiated the Dinaledi Schools Project that aims to improve the quality of maths and science education in South Africa. Through our involvement with the project, 30 schools have benefi ted as we renovated laboratories, provided new equipment and awarded 85 bursaries to students to pursue a tertiary qualifi cation in science and technology, engineering and accounting.

Economic developmentWe see economic development as the support of income-generating projects aimed at poverty alleviation through job creation. Although we have funded various projects benefi ting more than 2 000 individuals since 2007, we continue to channel our eff orts towards food security, business skills development and craft development.

EducationSustainable livelihoods

Special interventionsEmployee volunteerism

60%20%

10%

10%

EducationEconomic developmentHealthEmployee volunteerismStrategic interventions

44%21%

14%

9%

12%

Future CSI spend Current CSI spend



Our fl agship project, the Nguni Cattle Project, was established in 2004 in the Eastern Cape and later expanded. The project re-introduces the Nguni cattle breed in rural areas with the hope of establishing commercial cattle farmers. Currently operational in six provinces, to date (158) farmers have been assisted and R26 million has been disbursed since 2004. Due to its success, the National Department of Agriculture, Forestry and Fisheries has pledged further funds for the expansion of the project throughout the country. In the year under review, R14.4 million was disbursed for the Nguni cattle project.

HealthcareTo assist in alleviating the pressure on South Africa’s public healthcare system and the severe impact of HIV and AIDS, we committed ourselves to supporting healthcare through the provision of equipment to public healthcare facilities.

Amongst others, we have helped to renovate Alexandra and Harry Gwala clinics’ X-ray room in Gauteng, provided Mafane Clinic in the Free State with much-needed clinical equipment and helped rebuild one of the Red Cross Children’s Hospital medical wards.

Employee volunteerism and givingWe also encourage our employees to become directly involved in CSI through volunteering. The following three programmes continue to be well supported by our employees:

• Habitat for Humanity – 250 volunteering employees have annually built a total of 25 houses since 2007

• I do care – 91 charities have benefi ted from our “I do care” fund since 2002. In total, employees contribute some R300 000 towards the fund and are able to select which charities will receive support on the condition that they meet the set criteria determined by our CSI committee

• My community, my responsibility – A project launched in 2010 to celebrate our 70th birthday. IDC departments chose a charity and volunteered seven hours of their time to such organisations in need. The IDC also donated R10 000 to each selected charity

LA

The way forward

Focus area Challenge Way forward

Dinaledi Schools Project The current support is narrowly focused and does not consider the broader needs of the schools

Employ a more holistic approach towards schools by doing diagnostic analysis on each school fi rst and then intervene accordingly

Education Unable to provide holistic feedback on outcomes and impact due to lack of integration of interventions including bursary scheme managed by our Human Capital department

Integrate education interventions including external bursary scheme in partnership with Human Capital. Extending the scope to include FET educational institutions will be implemented. Additionally, a bursary support programme will be established to track students’ performance, employment status and career advancement

Economic development No clear criteria on type of organisations to support

The focus will be on micro or survivalist enterprises that serve to alleviate poverty by sustaining livelihoods. We will target grassroots projects. Economic development will therefore be changed to sustainable livelihoods

Health The impact is impossible to measure due to specialised and expensive nature of the industry

Discontinue our focus on healthcare in support of other CSI activities

Special interventions This element is an administrative burden on the CSI staff due to persistent unsolicited requests from the public

This element will not be accessible through public requests any more, but will still be used for strategic cases such as humanitarian and disaster relief interventions

Employee volunteerism The cost of employee time and the Corporation’s contribution towards that is not tracked and programmes are not adequately integrated

Programmes are also inadequately promoted internally

An integrated programme will be put in place involving time and cash contributions made

Improved awareness and recognition measures will be put in place



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Environmental impact

OverviewConsidering the IDC’s physical footprint, our direct impact on the environment is limited to our offi ces and the impact that our employees have as they travel.

However, due to the nature of the business, the way we invest strongly infl uences the environmental impact of our clients. Our mandate to develop the industrial capacity of South Africa requires that we invest in sectors such as mining and mineral benefi ciation that, at least historically, have been the largest contributors to greenhouse gases and environmental damage. By tailoring our investment strategy, we are able to positively infl uence our clients to act more responsibly and reduce their environmental impact in all the sectors we serve.

Responsible fundingThe IDC is a signatory to the Finance Initiative of the United Nation Environmental Programme (UNEP-FI). UNEP-FI works towards understanding the impacts of environmental and social considerations on fi nancial performance.

As per the “UNEP Statement of Commitment by Financial Institutions on Sustainable Development” we recognise the active role we play in making the economy and lifestyles of South Africans sustainable. We further commit to integrating both environmental and social considerations into all aspects of our operation.

As far as practically possible, we identify the environmental and social risks of a project prior to the approval of funding. Where necessary, both environmental and social management actions are stipulated in our funding agreements.

More details regarding our Environmental and Social framework for measuring the fi nancial, developmental, social and environmental performance of our clients can be found on page 62 under Client monitoring.

Water strategyIDC recognises that water is a development constraint, especially in South Africa and Africa where water is often scarce, polluted, poorly distributed and increasingly more expensive. Industrial development relies on the reliable supply of safe water, therefore IDC has taken the decision to pursue an integrated approach to water management.

2012* 2011*

Water consumption (municipal) (m3/p.a.) 21 836 43 146

Electricity consumption (kW p.a.) 5 832 910

* This applies only to Sandton head offi ce

The IDC Water Strategy is a framework we use to evaluate the impact and water-related risks in our investments and our corporate offi ces. The framework allows us to set goals to improve our water-management performance throughout.

This year saw phase two of our Water Strategy being implemented. In partnership with the World Wildlife Fund (WWF), we have set out to test and demonstrate the Water Risk Assessment Tool for fi nancial institutions in order to develop benchmarks and targets. WWF and the German Development Finance Institution, DEG, jointly developed the tool. Our initial focus is on the mining and agricultural sectors, but we plan to extend the tool’s use to our other SBUs soon.

Green buildingsThe IDC plans to upgrade its head offi ce in Sandton by incorporating green building aspects. Our intention is to achieve a Green Star rating from the Green Building Council of South Africa (GBCSA).

The target completion date for the upgrade is October 2013.

Carbon footprintOur carbon footprint for period under review is 6 387.7tCO

2e for IDC head offi ce excluding regional offi ces.

This translates into an emissions intensity of 9.1tCO2e per

employee.

In future, it is expected that the calculation will also include IDC subsidiaries.

Carbon footprint

Financial year 2012

Scope 1 (tCO2e)

Fleet cars 51.5

Generator fuel 6.7

Jet fuel 179.6

Refrigerants (R22 and R134A) 375.5

Scope 2 (tCO2)

Electricity1 5 774.5

Total IDC (scope 1 and 2) 6 387.7

1 Electricity: Eskom emission factor (2011) 0.99 kgCO2 /kWh

For all scope 1 greenhouse gas emissions DEFRA 2011 was used.

The boundary for the carbon footprint is the Sandton head offi ce.

LA


Governance


Governance of the IDC is guided by the IDC Act (No 22 of 1940), the Public Finance Management Act, 1 of 1999 (“PFMA”), and the King Report on Governance for South Africa 2009 (King III). In keeping with best practice, IDC ensures that its governance practices and procedures comply with the Companies Act, 2008. In the year under review, we have taken signifi cant steps to integrate sustainability issues into the core of our business. As discussed earlier in this report, we have improved our stakeholder engagement to establish issues material to our operations and have incorporated these into our strategy.

In the general course of business, we have applied the principles set out in King III with the following qualifi cations:

• Currently the Board monitors and evaluates signifi cant IT investments and expenditure

• Currently we are building our capacity to ensure:

° The integrity of the Corporation’s integrated report

° Sustainability reporting and disclosure is integrated with the Corporation’s fi nancial reporting

° Sustainability reporting and disclosure is independently assured

• Considering our status as a State-owned enterprise, equitable treatment of shareholders is not applicable.

IDC Board and committeesIDC BoardThe IDC’s Board is constituted to ensure a wide range of skills and knowledge necessary to meet the Corporation’s strategic objectives. The size of the IDC Board is dictated by the IDC Act, which permits a minimum of fi ve and a maximum of fi fteen directors to be appointed by the shareholder. The IDC has a unitary board structure and as at 31 March 2012 comprised one executive and thirteen non-executive members and a gender composition of

six female and eight male directors. The Chairperson of the IDC Board is an independent, non-executive director. In line with the recommendations of King III, the positions of Chairperson and Chief Executive Offi cer are separately held to ensure a clear division of duties. The non-executive directors are not involved in day-to-day operations of the business and do not draw any remuneration from IDC other than for board fees.

At the Annual General Meeting on 25 November 2011, six board members retired in accordance with the provisions of Section 9 of the IDC Act, which determines that non-executive directors may hold offi ce for a period of three years. We maintained continuity on the Board by retaining Ms Monhla Hlahla as Chairperson, while fi ve existing board members were re-appointed and seven new appointments were made. All appointments were recommended by the Minister of Economic Development in accordance with the IDC Act. All appointments were approved by Cabinet and a Board induction was held for all new Board members.

Our directors are individuals of high calibre with diverse backgrounds and expertise, facilitating independent judgement and eff ective deliberations in the decision-making process whilst pursuing the IDC’s strategic objectives. The Board met for the fi rst time on 28 February 2012, since the appointment of the new Board members.

The Board is responsible to the shareholder for setting economic, social and environmental direction through strategic objectives and key policies and monitors implementation through structured reporting systems. The Board accepts responsibility for the annual fi nancial statements.

The IDC Board undergoes an evaluation process every two years in line with the recommendations of King III. The last Board evaluation took place in the 2010/11 fi nancial year and the next one will be held at the end of 2012/13.


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Board members have attended the following Board meetings during the reporting period:

Name of director28 February

201219 April

201121 June

201123 August

201120 October

2011

MW Hlahla* ✔ ✔ Α ✔ ✔

LI Bethlehem ✔ ✔ ✔ ✔ ΑLL Dhlamini Α ✔ ✔ ✔ ✔

SK Mapetla ✔ ✔ ✔ ✔ ✔

LR Pitot ✔ ✔ ✔ ✔ ✔

MG Qhena ✔ ✔ ✔ ✔ ✔

NE Zalk ✔ ✔ ✔ ✔ Α

MC Nkuhlu** ❖ ✔ ✔ ✔ ✔

JR Barton** ❖ ✔ Α ✔ ✔

SM Moloko** ❖ ✔ ✔ ✔ ΑJC Mtshali** ❖ ✔ ✔ ✔ ✔

NG Nika** ❖ Α ✔ ✔ ΑNN Nokwe** ❖ ✔ Α Α ✔

MP Buthelezi*** ✔ – – – –JA Copelyn*** ✔ – – – –BA Dames*** ✔ – – – –RM Godsell*** ✔ – – – –BA Mabuza*** ✔ – – – –SM Rensburg*** ✔ – – – –ZJ Vavi*** Α – – – –

✔ Present Α Apologies ❖ Retired on 25 November 2011 * Chairman ** Retired *** Appointed on 25 November 2011.

IDC directors were remunerated as follows:

R’000 R’000Name of director 2012 2011

MW Hlahla Chairperson 292 542MC Nkuhlu** Deputy Chairperson 250 409NG Nika 117 286JR Barton 137 261LR Pitot 196 241LI Bethlehem* 229 163MP Buthelezi 33 –JA Copelyn**** 21 –BA Dames 45 –LL Dhlamini 192 208RM Godsell 21 –BA Mabuza 52 –SK Mapetla 167 272SM Moloko 148 205JC Mtshali 190 314BN Njobe – 107NN Nokwe 39 195SM Rensburg 45 –ZJ Vavi – –NE Zalk*** – –

Total 2 174 3 203


The diff erence in directors’ remuneration can be attributed to the reduction in the number of meetings held during the period under review.

*Ms LI Bethlehem does not derive any fi nancial benefi t from services rendered to the IDC. Her fees were paid directly to Standard Bank.**Mr MC Nkuhlu does not derive any fi nancial benefi t from services rendered to the IDC. His fees were paid directly to Nedbank.***Mr NE Zalk is employed by the dti and does not earn Director’s fees for services rendered to the IDC.****Mr JA Copelyn does not derive any fi nancial benefi t from services rendered to the IDC. His fees were paid directly to JCI.


Governance (continued)



RemunerationIDC non-executive Board members are remunerated for the meetings they attend at (market-related) rates approved by the shareholder. No performance-based remuneration or retainer fees are paid to directors. Senior management and other employees are paid market-related salaries as well as through the IDC short- and long-term incentive schemes based on performance and achievement of specifi c set targets.

Delegation of authorityWhile the Board delegates its authority to management, it retains the responsibility concerning the exercise of its delegated authority. In terms of Section 56 of the Public Finance Management Act, 1 of 1999 (PFMA), the Board may confi rm, vary or revoke any decision taken by an offi cial as a result of a delegation of powers by the Board.

Board committeesThe Board has established fi ve standing committees, namely: Risk and Sustainability Committee, Audit Committee, Investment Committee, Human Capital and Nominations Committee, Governance and Ethics Committee, all of which are ultimately accountable to the Board.

Board Investment Committee (BIC)The purpose of the BIC is to act on behalf of the Board by considering transactions mandated to it by the Board which would, prior to the creation of the committee, vest with the Board. The BIC considers transactions where IDC transaction exposure is above R250 million and/or the counterparty exposure is between R1 billion and R7 billion. The BIC also considers transactions where the sector, transaction and/or regional limit is breached. It also reviews transactions where the counterparty limit is breached and makes recommendations to the Board. Continuity on the committee was maintained by retaining two Board members who served previously on this committee.

Human Capital and Nominations Committee (HCNC)The main objective of the HCNC is to assist the Board in the development of compensation policies, plans and performance goals, as well as specifi c compensation levels for the IDC. The HCNC manages the Board’s annual evaluation of the performance of the Chief Executive Offi cer and also assists the Board in fulfi lling its oversight responsibilities relating to succession planning as well as overall compensation and human resource policies for all IDC employees.

Board Risk and Sustainability Committee (Risk)The primary duty of the Risk Committee is the governance of risk. It also assists the Board to determine the maximum mandate levels for the various Credit and Assets and Liabilities Committee decisions. The committee also assists management with the responsible stewardship of sustainability, including stakeholder impact, management of material issues, sustainability governance and reporting.

Two Board members from the previous Board were appointed to the committee in order to ensure continuity.

Board Audit Committee (Audit)The committee monitors the adequacy of fi nancial controls and reporting; reviews audit plans and adherence to these by external and internal auditors; ascertains the reliability of the audit; ensures that fi nancial reporting complies with IFRS and the Companies Act; ensures the integrity of integrated reporting; ensures that there are eff ective measures in place on Information Technology risks as they relate to fi nancial reporting; reviews and makes recommendations on all fi nancial matters; and recommends the appointment and removal of auditors to the Board.

The Board Audit Committee has complied with all relevant King III principles, including integrated reporting, as evidenced by the IDC’s fi rst issue of its Integrated Report 2012.

The Board Audit Committee has made an assessment of the eff ectiveness of the control environment through application of the “Combined Assurance” concept. This included engagements with diff erent assurance providers (e.g. Internal Audit, External Auditors, Corporate Secretariat, etc.) in order to formulate a holistic opinion in this regard.

Where weaknesses were identifi ed in internal controls, corrective action was taken to eliminate or reduce the risks. The Board Audit Committee is of the opinion, based on the information and explanations given by management and the Internal Audit Department and discussions with the independent external auditors on the results of their audits, that the internal controls of the Corporation have operated eff ectively throughout the year under review and, where internal controls did not operate eff ectively, that compensating controls have ensured that the Corporation’s assets have been safeguarded, proper accounting records maintained and resources utilised effi ciently.


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Governance and Ethics Committee (GEC)The main purpose of the GEC is to advise the Board generally on corporate governance and ethics matters. The GEC aims to promote the ideals of corporate fairness, transparency and accountability as well as to assist the Board in vetting funding applications, projects and any matter in which a director of the IDC has an interest.

Shareholder engagementThe shareholder meets the IDC Board at least once a year in order to discuss the shareholder’s strategy and expectations. The shareholder representative (Minister of Economic Development) met the Board on 28 February 2012 to address issues of strategy and expectations. The IDC contracts annually with the shareholder through the Shareholder Compact and reports on the year under review through the annual report. The report is distributed to members of Parliament and is available on request to the public.

The Board has unrestricted access to executive management in an eff ort to enhance communication and achievement of the vision of the Corporation. Further communication with IDC employees is done through Board feedback sessions convened by the CEO for heads in Strategic Business Units and departments after each Board meeting. The Board feedback sessions aff ord IDC heads an opportunity to raise material issues.

Ethics policyBoard members are required to declare their interests in the declaration register before attending IDC Board meetings. In addition, a Recusal Policy exists to help directors avoid confl icts of interest. The GEC also considers transactions where there are confl icts of interest.

An ethics survey was conducted during the reporting period. There were 460 respondents resulting in a revised Code of Ethics and Business Conduct policy and the implementation of a gift policy. The Executive Committee (Policy) approved the revised policy and recommended it to the GEC as well as the IDC Board.

Fraud preventionIDC has a comprehensive Fraud Policy, Fraud Prevention Plan and Fraud Response Plan in place. Driven by its leadership, the IDC communicates to its broad base of stakeholders that it will not tolerate fraud, theft or corruption in any guise.

Fraud awareness and anti-corruption training/presentations by Internal Audit have been conducted through “On-boarding” sessions for new employees, six Business Units and seven departments within the Corporation during the year.

In the year under review 45% of the employees received training on fraud prevention.

Company SecretaryThe Company Secretary is responsible to the Board for, inter alia, ensuring compliance with procedures and applicable statutes and regulations. To enable the Board to function eff ectively, all directors have full and timely access to information that may be relevant to the proper discharge of their duties. This includes information such as corporate announcements, investor communications, agenda items for Board meetings and other developments which may aff ect us and our operations. This also includes access to management where required.

Internal AuditInternal Audit is an independent appraisal function to provide management and the Board Audit Committee with assurance on the adequacy and eff ectiveness of the Corporation’s Systems of Internal Control as well as to provide consultative and forensic investigation services. Internal Audit makes recommendations to management where defi ciencies have been identifi ed in the Internal Control Systems.

Internal Audit has based its three-year audit plan on the IDC risk register, in particular on the key risks (see pages 78 and 79) internal audit has engaged in at least 70 assignments comprising internal audit reviews as well as fraud investigations during the fi nancial year. The sampling guide for the execution of these audits ensures coverage of a broad spectrum of business units and departments through the various reviews performed during the year.

FrameworkThe IDC has adopted an internal control framework as set out by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). The value of COSO-based auditing is that it enables eff ective evaluation of the soft controls while avoiding the faulty, negative fi ndings that can sometimes result from traditional audit methods. Customer-focused and outcome-oriented, this method addresses systemic root causes, avoids placing blame and produces workable solutions.

Authority and competenceInternal Audit’s authority is established by the internal audit charter. The quality of work performed by Internal Audit is continuously assessed by management and at least annually by the Board. External quality assessments are conducted at least once every fi ve years by a qualifi ed, independent reviewer or review team from outside the IDC.







Enterprise risk managementIn line with best practice, the IDC has instituted a robust Enterprise Risk Management (ERM) process, founded on a framework that is shareholder value-based, organisationally embedded, supported and assured, and reviewed on a continuous basis. ERM is the application of risk management throughout the IDC rather than only in selected business areas or disciplines. Accordingly, risk management at the IDC is decentralised and centralised with every staff member of the IDC being responsible for risk management.

IDC’s Risk Management Framework lays out guiding principles for the IDC’s management of risk on an ERM basis. This framework comprises the totality of all the structures, policies, strategies and procedures within the IDC that deal with risk management at the strategic or ERM level.

An assessment of the risks IDC faces is undertaken annually. This process strives to achieve the identifi cation of the critical risks the Corporation may face to enable the Corporation to formulate appropriate risk strategies and action plans to mitigate and address these risks where necessary. Our key risks are listed on pages 78 and 79.

Risk assessment processRisk taking is a necessary element of the IDC’s business model, largely in the form of loans and equity, for potential developmental and fi nancial returns. This is to ensure IDC’s future sustainability as a development funder. It is therefore essential that we thoroughly understand the risks facing the IDC across our major risk categories, these being Strategic risk, Financial risk, Operational risk, Governance risk and Information Technology Governance risk.

The IDC’s risk assessment process presented in the following diagram incorporates seven steps and is typically performed over an 18-month cycle. Risk at the level of the operations is identifi ed through the Risk Management Department’s operational risk activities.

Strategy: The fi rst step in the risk cycle is to assess the risks arising from the IDC’s strategic objectives and those risks which could prevent the IDC from achieving its strategic objectives.

Risk Identifi cation: Diff erent methodologies are employed to identify IDC’s risks. These methodologies vary from one-on-one interviews to the distribution of surveys and workshops with the Board, management and staff . We also:

• Review prior years’ risk assessments

• Review Internal Audit Department fi ndings for prior years

The IDC’s Risk Assessment Process

• Review the External Auditor’s Management Letter for prior years

• Consider inputs from management and other senior staff in the Corporation

• Analyse benchmarked risk standards (mainly King III, Basel II) and other organisations’ risk assessment activities

Risk Assessment: Having identifi ed the risks, these are prioritised based on the probable impact following an occurrence as well as the likelihood of the occurrence happening. Risks are assessed on a residual risk basis; that is, the possible impact and likelihood taking into consideration the Corporation’s existing controls.

Risk Mitigation: Controls for each of the risks are identifi ed through business-focused workshops with Strategic Business Unit and Departmental heads and other senior role players.

Execution and Monitoring: The results of the risk assessment, including key controls under review, are presented to IDC’s Executive Management and the IDC Board Risk and Sustainability Committee. Thereafter, a summary of key matters is presented to the IDC Board. This process enables IDC’s Executive Management and Board to highlight areas where additional focus is required.

Assurance: Assurance that the risks identifi ed and the associated controls are appropriate and eff ective is the responsibility of the assurance providers, as identifi ed in the assessment. Internal Audit, as the Corporation’s main assurance provider, utilises this risk assessment in the formulation of its Internal Audit Programme.

3. Risk assessment

4. Risk mitigation

5. Execution and monitoring

6. Assurance

7. Monitoringand reporting

1. Strategy 2. Risk identification


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Monitoring and Reporting: The Risk Management Department monitors and reports on an ongoing basis to Executive Management and the Board Risk and Sustainability Committee regarding the risks facing the IDC.

Risk appetite and risk tolerance processOne of the key practices of risk management in IDC is the determination and quantifi cation of our risk appetite based on what is of strategic importance. Risk appetite is defi ned as the amount and type of risk that IDC is willing to pursue or retain. The determination of the IDC’s risk appetite plays an important role in its ERM activities and is linked and aligned to its mandate and business objectives.

Risk tolerance is considered an integral part of the process and is an organisation’s readiness to bear the risk after mitigation, in the pursuit of its strategic objectives.

The IDC’s Risk Appetite and Tolerance Process incorporate fi ve steps: 1. Establish Key Risk Indicator (KRI) per risk2. Establish risk appetite thresholds per KRI3. Review the results with the risk owners4. Compare risk measurement outcomes with results

from the annual risk assessment 5. Summarise key fi ndings


The IDC’s Risk Management Framework:

IDC’s ERM process is benchmarked against …

PFMA KING III BASEL IITreasury

Regulations

Annual Risk Assessment … an assessment of risks with corporate impact

IDC has adopted a hybrid risk management solution (both centralised and decentralised) to best refl ect our business model and to maximise cost/benefi t trade-off s.

Risk Appetite/ Tolerance Levels … set at strategic level

Risk Management Policy … communicates IDC’s stance regarding risk management

Risk Management Plan … to establish and monitor ERM activities on an annual basis

Key objectives of IDC’s risk management function:

• Apply best practice principles to minimise losses and to protect IDC’s capital base

• Promote risk awareness culture

• Maximise fi nancial or developmental returns with an acceptable risk profi le (maximise shareholder’s value)

• Strengthen controls

Risk identifi cation sources: Survey + workshop + audit fi ndings + fi nancial sector library

Risk measurement: Determine probability of occurrence + measure impact (set KPI’s)

Strategic People Stakeholder Macro-economic Reputation etc.

Financial

• Credit

• Market

• Concentration

• Liquidity

• Capital structure

• etc.

Governance Regulatory Legal Documentation Corporate Governance etc.

IT Governance

• Monitoring and evaluation

• Delivery and support

• Business disruption and systems failure

• etc.

Operational SCM Human processing error

Data management

etc.

Risk management/ analysis:Allocate accountability + implement mitigating controls/processes + monitoring eff ectiveness of controls (assurance providers)



Roles and responsibilitiesRisk Management Department (RMD): RMD proactively promotes risk awareness and has the capacity to monitor and oversee the management of key risks facing the Corporation on the basis of the ERM Framework. RMD is responsible for initiating and facilitating the annual risk assessment function.

Executive Management: Responsible for the management of our risks. The Chief Executive Offi cer (CEO) sets the “tone at the top” that aff ects integrity, ethics and other factors within the control environment. Divisional Executives, in turn, assign responsibility for the establishment of more specifi c risk management policies and procedures to Strategic Business Unit and Departmental heads.

Internal Audit Department: The Internal Audit Department assists by reviewing critical control systems

and risk management processes. Moreover, Internal Audit performs an eff ectiveness review of management’s risk assessments and the organisation’s internal controls whilst providing guidance around the design and improvement of control systems and risk mitigation strategies.

Internal Audit plays a critical role in providing the Board and management with an objective and comprehensive view of the internal control environment of a business.

Board Risk and Sustainability Committee: In terms of the IDC Board Charter, the Board Risk and Sustainability Committee is responsible for assessing and prioritising risk. A summary of the committee’s responsibilities are provided in the governance section of this report on page 74. Further details are available at www.idc.co.za/IR2012


Risk Universe and Risk RegisterOur risk assessment cycle for 2012 has resulted in a Risk Universe and Risk Register of the material risks that the Corporation may be exposed to. The top risks facing the Corporation were (in alphabetical order):

Risk description Key mitigating controls

Collectibility The risk of investment losses/loss of income or inability to collect what is due to the IDC

• Collateral policy

• Contractual agreements

• Post-investment monitoring activities, policies and processes

• Business partner due diligence processes

Concentration The risk of concentration within the IDC portfolio from a counterparty, sector, regional/country or product perspective

The following policies are in place:

• Counterparty and transaction limits

• Sector limits

• Regional investment limits and country boundaries

• Loans and equity analysis reports and portfolio

Customer satisfaction The risk of the IDC failing to meet expected levels of customer satisfaction

Annual customer satisfaction, tone of media coverage, “climate“ and stakeholder perception surveys are conducted

Documentation The risk of inadequate/inappropriate legal documentation

• Legal department systems and procedures

• Systems restrictions for data capture, formatting and updates

• Induction training for new staff on documentation control and management protocols within IDC

• Electronic and manual document management and archiving


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Risk description Key mitigating controls

Due diligence Ineff ective/incomplete due diligence process

• Training programmes for existing staff

• Independent approval committees

• Peer reviews

• Lessons learnt portal

• Legal due diligence

Equity price The risk of the volatility of the IDC share portfolio impacting the IDC

• Counterparty limit as well as sector limit policies

• Equity valuation modelling

• “Stop loss” mechanisms

Income dependence The risk of the IDC being over-dependent or reliant on a limited number of counterparties or fi nancial products

• Counterparty and transaction limit policy

• Clear ownership of the “top 5 equity” investments

• Risk appetite analysis and reporting

• IDC budgeting process

Macro-economic The risk of macro-economic conditions impacting the IDC’s business

• Research and Information Department analysis of economic, political, industrial, legal and other events and reporting potential implications to the Board and Exco

• Research and Information Department analysis and reporting of macro-economic trends and forecasts to the Board and Exco

• Concentration policies and analyses provide early warning signals

Pricing The risk of margin erosion or income opportunity loss due to inappropriate or incorrect pricing

• Pricing policies for debt, equity and guarantees

• Independent pricing comment by Risk Management Department

• Independent approval authorities

Reputation The risk that an action or inaction by IDC damages the organisation’s reputation

• IDC engages a public relations agency for strategic communication

• Communications Department responsible for co-ordination of all external communication

• Media analysis report – feedback to the Corporation

• Proactive generation of articles in the media

• Crisis communications procedure

Sector The risk of negative sector-specifi c trends • Sector limits policy

• Portfolio analysis and reporting

• Risk appetite analysis and reporting




King III checklistThe following table provides an assessment of the Corporation’s compliance with King III:

Ethical leadership and corporate citizenship

Eff ective leadership based on an ethical foundation

Responsible corporate citizen

Eff ective management of company’s ethics

Board and directors

The Board is the custodian of corporate governance

Strategy, risk, performance and sustainability are inseparable

The Board should consider business rescue proceedings when appropriate

Directors act in the best interests of the company

The Chairman of the Board is an independent non-executive director

Framework for the delegation of authority has been established

The Board comprises a balance of power, with a majority of non-executive directors who are independent

Directors are appointed through a formal process

Formal induction and on-going training of directors is conducted

The Board is assisted by a competent, suitably qualifi ed and experienced Company Secretary

Regular performance evaluations of the Board, its committees and the individual directors

Appointment of well structured committees and oversight of key functions

A governance framework is agreed between the Corporation and its subsidiaries

Directors are fairly and responsibly remunerated

Remuneration of directors is disclosed in the annual report

The Corporation’s remuneration policy is approved by its shareholders

Internal Audit

Eff ective risk-based Internal Audit

Written assessment of the eff ectiveness of the company’s system of internal controls and risk management

Internal Audit is strategically positioned to achieve its objectives

Audit Committee

Eff ective and independent

Suitably skilled and experienced independent non-executive directors

Chaired by an independent non-executive director

Oversees integrated reporting

A combined assurance model is applied to improve effi ciency in assurance activities

Satisfi es itself of the expertise, resources and experience of the company’s fi nance function

Oversees the external audit process

Reports to the Board and shareholders on how it has discharged its duties

Compliance with laws, codes, rules and standards

The Board ensures the company complies with relevant laws

The Board and its directors have a working understanding of the relevance and implications of non-compliance

Compliance risk forms an integral part of the company’s risk management process

The Board has delegated to management the implementation of an eff ective compliance framework and process

Governing stakeholder relationships

Appreciation that stakeholders’ perceptions aff ect a company’s reputation

Management actively deals with stakeholder relationships

There is an appropriate balance between its various stakeholder groupings

Equitable treatment of shareholders

Transparent and eff ective communication to stakeholders

Disputes are resolved eff ectively and timeously

The governance of information technology

The Board is responsible for information technology (IT) governance

IT is aligned with the performance and sustainability objectives of the Corporation

Management is responsible for the implementation of an IT governance framework

The Board monitors and evaluates signifi cant IT investments and expenditure

IT is an integral part of the Corporation’s risk management

Information assets are managed eff ectively

The Risk Committee assists the Board in carrying out IT responsibilities



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The governance of risk

The Board is responsible for the governance of risk and setting levels of risk tolerance

The Board determines the levels of risk tolerance

The Audit and Risk Committees assist the Board in carrying out its risk responsibilities

The Board delegates the risk management plan to management

The Board ensures that risk assessments and monitoring are performed on a continual basis

Frameworks and methodologies are implemented to increase the probability of anticipating unpredictable risks

Management implements appropriate risk responses

The Board receives assurance on the eff ectiveness of the risk management process

Suffi cient risk disclosure to stakeholders

Integrated reporting and disclosure

Ensures the integrity of the Corporation’s integrated report

Sustainability reporting and disclosure is integrated with the Corporation’s fi nancial reporting

Sustainability reporting and disclosure is independently assured

Key Applied In progress Not applicable


GRI checklist

GRI Section/comment Page1. Strategy and AnalysisProfi le Disclosure

1.1 Statement from the most senior decision-maker of the organisation Chairman’s statement 12–151.2 Description of key impacts, risks, and opportunities Key achievements and challenges

Our strategy Enterprise risk management

224–2676–79

2. Organisational Profi le2.1 Name of the organisation Corporate profi le 32.2 Primary brands, products, and/or services Our main business and funding

activities 4

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries and joint ventures

Strategic business unitsFinancial statement notes 9 and 10

27142–146

2.4 Location of organisation's headquarters IDC offi ces in South Africa 4, 1782.5 Number of countries where the organisation operates, and names of countries with

either major operations or that are specifi cally relevant to the sustainability issues covered in the report

IDC offi ces in South Africa 4

2.6 Nature of ownership and legal form Corporate profi le 32.7 Markets served (including geographic breakdown, sectors served, and types of

customers/benefi ciaries)See our main business and funding activities

4, 27–60

2.8 Scale of the reporting organisation Corporate profi le Staff profi le

4–565

2.9 Signifi cant changes during the reporting period regarding size, structure or ownership

Strategic business units 27

2.10 Awards received in the reporting period AADFI – Best Performing DFI 2011

3. Report Parameters3.1 Reporting period (e.g. fi scal/calendar year) for information provided About this report 23.2 Date of most recent previous report (if any) About this report 23.3 Reporting cycle (annual, biennial, etc.) About this report 23.4 Contact point for questions regarding the report or its contents About this report 23.5 Process for defi ning report content Stakeholder engagement

Our material issues 20–2223

3.6 Boundary of the report (e.g. countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance

About this report 2

3.7 State any specifi c limitations on the scope or boundary of the report (see completeness principle for explanation of scope)

About this report 2

3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can signifi cantly aff ect comparability from period to period and/or between organisations

About this report 2

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report. Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols

As far as practicable, GRI Indicator Protocols were followed

3.10 Explanation of the eff ect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g. mergers/acquisitions, change of base years/periods, nature of business, measurement methods)

Being the fi rst integrated report, there were no re-statementsAbout this report 2

3.11 Signifi cant changes from previous reporting periods in the scope, boundary or measurement methods applied in the report

This is the fi rst integrated report 2

3.12 Table identifying the location of the Standard Disclosures in the report GRI checklist 82–843.13 Policy and current practice with regard to seeking external assurance for the report Board Audit Committee decision 2, 74,

85–86

4. Governance, Commitments, and Engagement4.1 Governance structure of the organisation, including committees under the

highest governance body responsible for specifi c tasks, such as setting strategy or organisational oversight

Governance 8–1172–75

4.2 Indicate whether the Chair of the highest governance body is also an executive offi cer

The Chairman of the IDC Board of Directors is non-executive

72



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GRI Section/comment Page4.3 For organisations that have a unitary board structure, state the number and gender

of members of the highest governance body that are independent and/or non-executive members

IDC Board 72–73

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body

Stakeholder engagement 20–22

4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organisation's performance (including social and environmental performance)

IDC Board 73–74

4.6 Processes in place for the highest governance body to ensure confl icts of interest are avoided

Ethics policy 75

4.7 Process for determining the composition, qualifi cations and expertise of the members of the highest governance body and its committees, including any consideration of gender and other indicators of diversity

IDC Board 72

4.8 Internally-developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation

Vision and mission Corporate profi le Preferential procurementResponsible fundingGovernance

13637175–77

4.9 Procedures of the highest governance body for overseeing the organisation's identifi cation and management of economic, environmental, and social performance, including relevant risks and opportunities, and adherence or compliance with internationally-agreed standards, codes of conduct, and principles

Governance 75–79

4.10 Processes for evaluating the highest governance body's own performance, particularly with respect to economic, environmental, and social performance

IDC Board and committees 72

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation

Internal AuditEnterprise risk management

7576–79

4.12 Externally-developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses

Our B-BBEE score Subscribe to B-BBEE Codes of Good Practice Subscribe to Mining Charter Signatory to UNEP-FIGuided by PFMA

3

63447172

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations in which the organisation: * Has positions in governance bodies; * Participates in projects or committees; * Provides substantive funding beyond routine membership dues; or * Views membership as strategic

Responsible funding Governance section List of memberships on the website

7172

4.14 List of stakeholder groups engaged by the organisation Stakeholder engagement 21–224.15 Basis for identifi cation and selection of stakeholders with whom to engage Stakeholder engagement 204.16 Approaches to stakeholder engagement, including frequency of engagement by

type and by stakeholder groupStakeholder engagement 20–22

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting

Stakeholder engagement 21–23

EconomicDisclosure on management approach: See the defi nition of our mission on page 1; our mandate and past performance on pages 3–7; strategy on pages 24–26. The actual performance is outlined on pages 28–55. Our special vehicles/products are explained in the development funds section on pages 58–59. There is an intertwining of economic and social development in the agency development and support section on pages 56–57. Risk management, which plays a role in the precautionary approach to funding, is outlined on pages 76–79. The chapter on investing in our customers on pages 61–63 discusses various activities to support the main strategyEC1 Direct economic value generated and distributed, including revenues, operating

costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments

IDC value-added statement 5

EC4 Signifi cant fi nancial assistance received from government IDC is self-fi nancing Corporate profi leFlow of funding

136

EC6 Policy, practices, and proportion of spending on locally-based suppliers at signifi cant locations of operation

Preferential procurement 63



GRI checklist (continued)

GRI Section/comment PageEC8 Development and impact of infrastructure investments and service provided

primarily for public benefi t through commercial, in-kind, pro bono engagement Agency Development and Support programmes Business support Corporate Social Investment

57 6169

EnvironmentalDisclosure on management approach: See page 63 on the requirements as per our environmental and social framework, as well as our environmental impact on page 71, where we state our direct impacts. There is also a discussion of our stance on responsible funding, the issues that we have started working on, as well as planned future activitiesEN4 Indirect energy consumption by primary energy source Environmental impact 71EN6 Initiatives to provide energy-effi cient or renewable energy-based products and

services, and reductions in energy requirements as a result of these initiativesOur strategy Green Industries

2734–35

EN8 Total water withdrawal by source Environmental impact 71EN16 Total direct and indirect greenhouse gas emissions by weight Environmental impact 71EN26 Initiatives to mitigate environmental impacts of products and services, and extent

of impact mitigationEnvironmental impacts Responsible funding

6371

Social: Labour Practices and Decent WorkDisclosure on management approach: Refer to page 64 for an outline of the strategy for managing our human capital, which details the numerous activities around talent management in order to achieve our mandateLA1 Total workforce by employment type, employment contract, and region, broken

down by genderStaff profi le 65–66

LA2 Total number and rate of new employee hires and employee turnover by age group, gender and region

New employees and employment terminations

65

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes

Internal health and safety management

67

LA8 Education, training, counselling, prevention, and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases

Employee health and wellness programme

67

LA10 Average hours of training per year per employee by gender and by employee category

Learning and development 68

LA11 Programmes for skills management and life-long learning that support the continued employability of employees and assist them in managing career endings

Talent management and succession

68

LA12 Percentage of employees receiving regular performance and career development reviews by gender

Talent management and succession

68

LA13 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership and other indicators of diversity

Corporate profi leStaff profi le

8–1165

LA15 Return to work and retention rates after parental leave, by gender 100% retention in year under review, information on the website

Social: Human RightsDisclosure on management approach: Issues pertaining to human rights are presently confi ned to Human Capital. There is a also a policy on grievance, as well as formal processes to deal with these mattersHR11 Number of grievances related to human rights fi led, addressed and resolved

through formal grievance mechanismsZero grievances brought against the Corporation in the year under review, information on website

Social: SocietyDisclosure on management approach: Refer to the governance section for an outline of the steps that are in place to ensure that we are good corporate citizens, specifi cally the steps taken to raise awareness of governance within the workplaceSO2 Percentage and total number of business units analysed for risks related to

corruptionFraud prevention 75

SO3 Percentage of employees trained in the organisation’s anti-corruption policies and procedures

Fraud prevention 75

Social: Product Responsibility Disclosure on management approach: See page 20 on stakeholder engagement regarding the actions taken by the IDC to ensure that there is constant feedback between the Corporation and its stakeholders on the services we provide and their expectationsPR5 Practices related to customer satisfaction, including results of surveys measuring

customer satisfactionStakeholder engagement Innovation

2061



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Assurance statement

Independent Assurance Report on Selected Sustainability InformationTo the directors of Industrial Development Corporation of South Africa Limited

We have undertaken an assurance engagement on selected sustainability information as described below and presented in the 2012 Integrated Annual Report (the Report) of Industrial Development Corporation of South Africa Limited (IDC) for the year ended 31 March 2012.

Independence and expertiseWe have complied with the International Federation of Accountants (IFAC) Code of Ethics for Professional Accountants, which includes comprehensive

independence and other requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confi dentiality and professional behaviour. Our engagement was conducted by a multidisciplinary team of health, safety, social, environmental and assurance specialists with extensive experience in sustainability reporting.

Subject matter and related assuranceWe are required to provide assurance as follows:

1 Limited assurance on the following key performance indicators for the year ended 31 March 2012, prepared in accordance with the Global Reporting Initiative (GRI) G3.1 Guidelines, marked with an ‘LA’ on the relevant pages of the Report:



Key performance indicators BoundaryReport section and Page numbers

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments (value-added statement). – GRI Indicator EC1

IDC – Company IDC value-added statement page 5

Policy, practices, and proportion of spending on locally-based suppliers at signifi cant locations of operation. – GRI Indicator EC6

IDC – Company Preferential procurement page 63

Development and impact of infrastructure investments and services provided primarily for public benefi t through commercial, in-kind or pro bono engagement. – GRI Indicator EC8

IDC – Company ADS pages 56 and 57, Business support page 61, CSI page 69

Initiatives to provide energy-effi cient or renewable energy-based products and services, and reductions in energy requirements as a result of these initiatives. – GRI Indicator EN6

IDC – Company Green Industries page 35

Carbon footprint (total scope 1 and 2) (total direct and indirect greenhouse gas emissions by weight). – GRI Indicator EN16

IDC – Head Offi ce Environmental impact page 71

Total number and rate of employee hires and employee turnover by age group, gender and region. – GRI Indicator LA2

IDC – Company Investing in our people pages 65 and 66

2 Limited assurance on IDC’s self-declaration of the GRI B+ Application Level (page 2).

Directors’ responsibilitiesThe directors are responsible for the selection, preparation and presentation of the sustainability information, the identifi cation of stakeholder requirements and material issues, for commitments with respect to sustainability performance, and establishing and maintaining appropriate performance management and internal control systems from which the reported information is derived, and for such internal control as the directors determine is necessary to enable the preparation of the Report that is free from material misstatement, whether due to fraud or error.

The directors are also responsible for the selection and application of the criteria detailed below:

• The GRI G3.1 Guidelines applied to the selected key performance indicators

• The GRI G3.1 Guidelines on IDC’s self-declaration of the GRI B+ Application Level

Our responsibilityOur responsibility is to express assurance conclusions on the selected sustainability information based on our work performed. We have conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE 3000), Assurance Engagements other than the Audits or Reviews of Historical Financial


Information, issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform our engagement to obtain assurance about whether the selected sustainability information is free from material misstatement.

Our procedures and the extent of our procedures depend on our judgement, including the risks of material misstatement of the selected sustainability information. In a limited assurance engagement, the evidence-gathering procedures are less than where reasonable assurance is expressed. In making our risk assessments, we considered internal control relevant to IDC’s preparation of the Report. We believe the evidence we have obtained is suffi cient and appropriate to provide a basis for our conclusions.

Summary of work performedOur work included the following evidence-gathering procedures:

• Interviewing management and senior executives to evaluate the application of the GRI G3.1 Guidelines and to obtain an understanding of the control environment relative to the reported sustainability information

• Inspecting documentation to corroborate the statements of management and senior executives in our interviews

• Testing the processes and systems to generate, collate, aggregate, monitor and report the selected sustainability information

• Inspecting supporting documentation and performing analytical procedures

• Conducting an Application Level check on the Report to evaluate whether all disclosure requirements of the GRI B+ Application Level have been adhered to

• Evaluating whether the information presented in the Report is consistent with our fi ndings, overall knowledge and experience of sustainability management and performance at IDC

Conclusions1. On the selected key performance indicators

on which we are required to express limited assurance

Based on the work we performed, nothing has come to our attention that causes us to believe that the selected key performance indicators set out in the table above for the year ended 31 March 2012 are not fairly stated, in all material respects, in accordance with the GRI G3.1 Guidelines.

2. On IDC’s self-declaration on the GRI G3 B+ Application Level on which we are required to express limited assurance

Based on the work we performed, nothing has come to our attention that causes us to believe that IDC’s self-declaration of a B+ Application Level is not fairly

stated, in all material respects, in accordance with the GRI G3.1 Guidelines.

ComparabilityThis is the fi rst year that the IDC has sought assurance on the key performance indicators set out in the table above. We were engaged to provide assurance on the key performance indicators for the year ended 31 March 2012. Where comparatives for key performance indicators are presented by the IDC, such comparatives have not been assured and we do not express a conclusion on them.

Restriction of liabilityOur work has been undertaken to enable us to express the conclusions on the selected sustainability information to the directors of IDC in accordance with the terms of our engagement, and for no other purpose. We do not accept or assume liability to any party other than IDC, for our work, for this report, or for the conclusions we have reached.

KPMG Services (Pty) Limited SizweNtsalubaGobodoRegistered Auditor Registered Auditor

Per N Morris Per D Manana

Chartered Accountant (SA) Chartered Accountant (SA)

Registered Auditor Registered Auditor

Director Partner

26 June 2012 26 June 2012

KPMG Crescent SizweNtsalubaGobodo Building

85 Empire Road 20 Morris Street East

Parktown Woodmead

Johannesburg, 2193 Johannesburg, 2191

Assurance statement (continued)


Annual fi nancial statements

Report of the Board Audit Committee 88

Report of the Independent Auditors 90

Directors’ report 92

Declaration by the Group Company Secretary 97

Statements of fi nancial position 98

Statements of comprehensive income 99

Statements of changes in equity 100

Statements of cash fl ows 101

Segmental report – Primary segments 102

Segmental report – Secondary segments 103

Notes to the fi nancial statements 104

Acronyms 176


Report of the Board Audit Committeefor the year ended 31 March 2012

Report of the Board Audit Committee in terms of Regulations 27(1)(10)(b) and (c) of the Public Finance Management Act of 1999 (as amended) and requirements of King III Code of Governance.

In execution of its duties during the past fi nancial year, the Board Audit Committee has:

• Reviewed the procedures for identifying business risks and managing their impact on the Corporation, including the risk management functions

• Reviewed the Corporation’s policies and procedures for detecting and preventing fraud

• Reviewed the eff ectiveness of the Corporation’s policies, systems and procedures

• Reviewed the eff ectiveness and adequacy of the internal audit department and adequacy of its annual work plan

• Considered whether the independence, objectives, organisation, staffi ng plans, fi nancial budgets, audit plans and standing of the internal audit function provide adequate support to enable the committee to meet its objectives

• Reviewed the results of the work performed by the internal audit function in relation to fi nancial reporting, corporate governance, risk areas, internal control and any signifi cant investigation and management response

• Reviewed the co-ordination between the internal audit function and the external auditors and dealt with any issues of material or signifi cant dispute or concern

• Reviewed the Corporation’s compliance with signifi cant legal and regulatory provisions

• Reviewed such signifi cant transactions as the committee deemed appropriate

• Reviewed such signifi cant reported cases of employee confl icts of interest, misconduct or fraud, or any other unethical activity by employees or the Corporation

• Reviewed the controls over signifi cant fi nancial and operational risks

• Reviewed any other relevant matters referred to it by the board

• Reviewed the adequacy, reliability and accuracy of fi nancial information provided by management and other users of such information

• Reviewed the accounting and auditing concerns identifi ed by internal and external auditors

• Reviewed the annual report and fi nancial statements taken as a whole to ensure they present a balanced and understandable assessment of the position, performance and prospects of the Corporation

• Reviewed the external auditors’ fi ndings and reports submitted to management

• Reviewed the independence and objectivity of the external auditors

In terms of the King III requirements, the Audit Committee must either apply with the following principles or explain non-application thereof:

• Overseeing integrated reporting

• Ensuring that a combined assurance model is applied to provide a co-ordinated approach to all assurance activities

• Satisfying itself of the expertise, resources and experience of the company’s fi nance function

• Being responsible for overseeing of internal audit

• Being an integral component of the risk management process

• Being responsible for recommending the appointment of the external auditor and overseeing the external audit process

• Reporting to the Board and shareholder on how it has discharged its duties


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The Board Audit Committee has complied with all the King III principles, with the inclusion integrated reporting, evidenced by the Corporation’s fi rst issue of its Integrated Report 2012.

The Board Audit Committee has made an assessment of the eff ectiveness of the control environment through application of the “Combined Assurance” concept. This included engagements with diff erent assurance providers (e.g. Internal Audit, External Auditors, Corporate Secretariat, etc.) in order to formulate a holistic opinion in this regard.

Where weaknesses were identifi ed in internal controls, corrective action was taken to eliminate or reduce the risks. The Board Audit Committee is of the opinion, based on the information and explanations given by management and the Internal Audit Department and discussions with the independent external auditors on the results of their audits, that the internal controls of the Corporation have operated eff ectively throughout the year under review and, where internal controls did not operate eff ectively, that compensating controls have ensured that the Corporation’s assets have been safeguarded, proper accounting records maintained and resources utilised effi ciently.

Following our review of the fi nancial statements for the year ended 31 March 2012, we are of the opinion that they comply with the relevant provisions of the Public Finance Management Act, 1999, as amended, and International Financial Reporting Standards, and that they present fairly the results of the operations, cash fl ow and fi nancial position of the Corporation.

The Board Audit Committee concurs that the adoption of the going-concern premise in the preparation of the fi nancial statements is appropriate. We therefore recommend that the fi nancial statements as submitted be approved.

On behalf of the Board Audit Committee:

LR Pitot

Chairperson

19 June 2012


Report of the Independent Auditorsfor the year ended 31 March 2012

Independent Auditors’ Report of the Industrial Development Corporation of South Africa Limited to Parliament and the Shareholder – Minister of Economic Development Department

REPORT ON THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Introduction We have au dited the consolidated and separate fi nancial statements of the Industrial Development Corporation of South Africa Limited and its subsidiaries set out on pages 98 to 175, which comprise the consolidated and separate statements of fi nancial position as at 31 March 2012, the consolidated and separate statement of comprehensive income, statement of changes in equity and statement of cash fl ows for the year then ended, and the notes to the fi nancial statements, comprising a summary of signifi cant accounting policies and other explanatory information.

Directors’ responsibility for the fi nancial statementsThe Board of Directors, which consti tutes the accounting authority is responsible for the preparation and fair presentation of these consolidated and separate fi nancial statements in accordance with I nt ernational Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate fi nancial statements that are free from material misstatement, whether due to fraud or error.

Au ditor’s responsibility Our responsibility is to express an opinion on these consolidated and separate fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated and separate fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated and separate fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated and separate fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated and separate fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the eff ectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated and separate fi nancial statements.

We beli eve that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated and separate fi nancial statements present fairly, in all material respects, the fi nancial position of the Industrial Development Corporation of South Africa Limited and its subsidiaries as at 31 March 2012, and its fi nancial performance and cash fl ows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South.


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REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the Public Audit Act of South A frica (PAA) and General Notice 839 of 2011 issued in Government Gazette No 34783 of 28 November 2011 (General N otice) issued in terms thereof, we report the following fi ndings relevant to performance against pre-determined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion.

Pre-determined objectivesWe performed procedures to obtain evidence about the usefulness and reliability of the information in the pre-determined objectives report as set out on pages 95 and 96 of the annual report.

The reported performance against pre-determined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National Treasury annual reporting principles and whether the reported performance is consistent with the planned objectives. The usefulness of information further relates to whether indicators and targets are measurable (i.e. well defi ned, verifi able, specifi c, measurable and time bound) and relevant as required by the National Treasury Framework for managing programme performance information.

The reliability of the information in respect of the selected objectives is assessed to determine whether it adequately refl ects the facts (i.e. whether it is valid, accurate and complete).

There were no material fi ndings on the pre-determined report concerning the usefulness and reliability of the information.

Compliance with laws and regulations We did not identify any instances of m aterial non-compliance with specifi c matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA.

Internal control We did not identif y any defi ciencies in internal control which we considered suffi ciently signifi cant for inclusion in this report.

SizweNtsalubaGobodo VSP

Registered Auditor

Per D MananaChartered Accountant (SA)Registered AuditorPartner26 June 2012

SizweNtsalubaGobodo Building20 Morris Street EastWoodmeadJohannesburg, 2191

KPMG Inc.

Registered Auditor

Per S MalabaChartered Accountant (SA)Registered AuditorDirector26 June 2012

KPMG Crescent85 Empire RoadParktownJohannesburg, 2193

92 Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012

Directors’ report

IntroductionThe Industrial Development Corporation of South Africa

Limited (the IDC or Corporation) was established in 1940 by

an Act of Parliament. It is a registered public Corporation and a

Schedule 2-listed entity in terms of the Public Finance Management

Act (PFMA) and the related Treasury regulations. This report is

presented in accordance with the provisions of the prescribed

legislation and addresses the performance of the IDC as well as

relevant statutory information requirements. The Board of directors

is the accounting authority as prescribed in the PFMA.

Nature of businessThe IDC is a self-fi nancing, State-owned, development fi nance

institution that provides fi nancing to entrepreneurs engaged in

competitive industries. It follows normal company policies and

procedures in its operations, pays income tax at corporate rates

and pays dividends to its shareholder.

The IDC’s vision is to be “the primary driving force of commercially

sustainable industrial development and innovation to the benefi t

of South Africa and the rest of Africa”. Its objective is to support

industrial capacity development.

Performance managementThe IDC’s performance indicators refl ect the Corporation’s goals

as set out earlier in this integrated report. Measures related to its

key objective of industrial capacity development are integrated

with other indicators measuring its development impact, fi nancial

sustainability and effi ciency, stakeholder, customer and employee

relations, as well as innovation.

The IDC’s performance evaluation focuses primarily on the

fi nancing activities undertaken by the IDC and its dedicated wholly-

owned fi nancing subsidiaries (Mini Group) – Findevco (Pty) Ltd,

Impofi n (Pty) Ltd, Konoil (Pty) Ltd and The Export-Import Finance

Corporation of SA (Pty) Ltd.

The performance measurement system ensures that the

IDC remains aligned with its mandated objectives. Performance

indicators are reviewed every year to account for changes in the

external and internal environment and ensure that long-term

objectives will be achieved.

Performance indicators are measured and reported on the IDC’s

Executive Management Committee and the Board on a quarterly

basis. Regular activity reports and management accounts ensure

that any deviation from the target paths can be detected and

corrected, if necessary.

The IDC’s performance management system rewards employees

who exceed targets. The achievement of the targets represents

the expected level of performance. Performance targets are set at

the corporate, team and individual levels, and performance-linked

remuneration is based on the combination of the achievement of

the three levels of targets.

The measurement of performance at the corporate level is

reviewed by external auditors to ensure that the targets are

achieved according to the original intentions and that the overall

performance is a fair refl ection of the Corporation’s activities during

the period under review.

Performance indicatorsThe IDC has adopted a balanced approach in measuring

performance and has adapted the principles of the balanced

scorecard to cater for its own objectives and operations.

IDC measures indicators in six areas, specifi cally:

• Industrial capacity development

• Socio-economic impact

• Financial sustainability and effi ciency

• Stakeholder relations

• Employee retention

• Innovation

93Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012

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Pre-determined objectives

Refl ection on performance against pre-determined objectivesIDC performed well against both the short- and long-term

targets set for 2011/12. The Corporation saw good progress in the

implementation of strategies, increased deal fl ow and development

impact, as well as service delivery. Improved processes resulted

in reduced turnaround times for transactions that should lead

to higher levels of customer satisfaction. Increased stakeholder

engagement is refl ected in a more positive perception of IDC.

Higher retained income and growth in the balance sheet indicates

that IDC’s fi nancial sustainability is not under threat, although the

continuing upward trend in impairments needs to be monitored.

Industrial capacity developmentIDC measures its progress with regard to industrial capacity

development by setting milestones for key interventions. During

the year, signifi cant progress was made in the implementation

of these sector strategies. One area where progress was made

pertained to strategy implementation related to green industries.

Focus on this sector over the past few years resulted in IDC being

positioned to play a leading role in the renewable energy

programme in 2012. Activities during 2012 are also developing a

viable pipeline of projects for the future and are allowing IDC to

expand into other areas, such as funding for energy effi ciency,

emission and pollution management, and fuel-based renewable

energy. Other areas where achievements were recorded include

agro-industries, forestry, metals, tourism and benefi ciation.

Implementation of strategies in the healthcare and ICT industries

lagged, partly as a result of some of the projects requiring further

progress on the policy environment, regulatory approval or clients

delaying projects. Overall, 80% of the milestones for 2012 have

been achieved.

With respect to long-term targets, industry milestones leading

to priority industry development goals are also measured. In this

instance, 77% of milestones were achieved, with areas related to

the benefi ciation of titanium minerals, malaria eradication, as well

as tourism, lagging behind original expectations. This was mostly

due to slower than expected project development for these

initiatives.

The level of funding activity is an indication of IDC’s impact on

investment activity. During the year under review, IDC’s funding

activity reached unprecedented levels. In total, 327 transactions

were approved (fi gures prior to cancellations), compared to

253 in 2011. The net value of transactions for which agreements

were signed during the year increased to R16.4 billion compared

to R8.6 billion in 2011. The high level of funding was largely driven

by successful bids for the 1st round of the renewable energy

independent power producer procurement process and two

other transactions in excess of R1 billion. Despite cancellations of

undrawn commitments for several large transactions and delays in

the implementation of other projects, the level of disbursements

increased to R8.5 billion from R6.4 billion in the previous year.

Development impactThe most important development outcome that IDC aims to

achieve through its funding activities is to create sustainable jobs.

One of the reasons why IDC aims to increase its funding levels is

to have a greater impact, directly and indirectly, on employment.

The total impact on direct jobs for transactions approved in 2012

was 44 142, or 6% more than in 2011.

Forty-eight percent of the total number of jobs will be created and

saved in rural areas. This results from a large impact by funding for

mining, with renewable energy projects also contributing. Funding

to areas in the agricultural sector hit by fl oods also had an eff ect on

this high rural impact.

Financial sustainability and effi ciencyIDC’s fi nancing activities once again showed strong fi nancial results,

with a net operating income before partnerships of R1 977 million

recorded as compared to R1 468 million in the previous year.

These increased profi ts are mostly on the back of higher dividend

income, which increased by 22% in the year. Overall, interest and

fee income was 1.7% above the fi gure recorded in the previous year,

but 7% below budget mainly as a result of lower than budgeted

advances and increased interest impairments. The increases in

operating expenses should be seen in the light of the increased

activity demonstrated earlier. Project expenses increased to

R122 million compared to R14 million in the previous year. This

was to be expected, given that IDC’s strategy calls for increased

proactiveness and involvement in early stage projects. The overall

impairments charge (including write off s) to the income statement

increased by 38%, although the level of actual write off s was much

lower than in the previous year (R157 million in 2012 compared to

R743 million in 2011).

Although there have been increases in operating costs and grants

and donations, actual costs were still below budgets. Any gains

that this might have had in the ratio of operating expenses to

interest and fee income were off set by the fact that interest income

was also below budget because of lower advances compared

to expectations. The ratio of 85% is thus in line with what was

budgeted.

94

Directors’ report (continued)

Industrial Development Corporation of South Africa Limited – Integrated Annual Report 2012

Although there has been a 19% increase in the value of IDC funding

in the form of loans and investments (at cost), the increases in

impairments resulted in the ratio of impairments as a percentage

of total fi nancing at cost rising to 18.2%, compared to 17.3% in the

previous year. Although IDC performed well compared to the target

of 20%, this will need to be managed going forward.

IDC’s long-term fi nancial sustainability and its ability to continue

making investments in future are dependent on the growth of

its equity investments. As such, the Corporation targets growth

in its reserves rather than only short-term profi tability. Over the

last fi ve years, IDC’s reserves have grown at a compound annual

rate of 11.9%. Since a large portion of IDC’s reserves (58%) can be

attributed to fi ve large mature listed equity investments1, these are

excluded so as to determine whether IDC’s portfolio is growing

sustainably. Annual growth in reserves excluding the contribution

of these equities amounted to 12% over the fi ve years to 31 March

2012. To put it in perspective, the consumer price index increased at

a compound annual rate of 7.1% over the same period. The growth

in IDC’s reserves was thus 5.3 percentage points above infl ation

over the period.

Customer satisfaction and stakeholder relationsAn external research company conducts a customer satisfaction

survey for IDC on an annual basis. Over the past eight years, there

has been an increasing trend in the customer satisfaction results

of the survey, although this is fl attening as it is becoming more

diffi cult to show continued improvement. To focus eff orts on areas

where an impact can be made in terms of service delivery, IDC has

been concentrating on an area where negative feedback was

previously received from clients, namely turnaround times. As such,

IDC started targeting improvements in turnaround times in 2011,

with a number of specifi c initiatives introduced in 2012 to address

this issue.

The average turnaround time for all transactions signed in 2012

(excluding projects jointly developed by IDC from an early stage)

improved to 126 days, compared to 147 days in 2011.

For 2012, diff erent targets were set to diff erentiate between new

and existing clients, as well as between start-ups and expansions

and other transactions. The average turnaround time from

application to signature for new clients was 142 days, whilst for

existing clients it was 100 days. The average turnaround time

from application to signature for start-ups was 143 days and

for expansions and other transactions it was 119 days.

1 Sasol, Kumba Iron Ore, ArcelorMittal SA, BHP Billiton and Sappi.

IDC’s level of stakeholder relations is assessed through a survey

that measures perceptions of IDC in aspects such as products and

services, innovation, workplace, governance, corporate citizenship,

leadership and performance, among customers, potential

customers, government and regulators, civil society, the media,

other fi nancial institutions and DFIs, as well as suppliers. In the

survey conducted in the past fi nancial year, IDC achieved a score

of 73.1. This is signifi cantly higher than the global mean of 64.2

and a large improvement on the 50.4 achieved in the previous

survey conducted in the 2010 fi nancial year. This improvement

was the result of a concerted eff ort by IDC over the past two

years to improve its communication and interaction with various

stakeholders, including businesses, business organisations and

government agencies. This was eff ected through roadshows,

presentations, individual meetings, etc.

Employee retentionDuring the year, IDC started implementing a strategy to transform

itself into a high performance organisation. One aspect of this

strategy is to retain and deploy talent to enable IDC to deliver on

its objectives. Although there has been an improvement in staff

turnover since the start of the recession, the further improvement

experienced in 2012 might be an indication that the strategy is

starting to bear fruit. In 2012, the turnover rate of high potential

individuals and successors reduced to 7.2%, from 10.8% in 2011.

InnovationWithout innovating, IDC cannot hope to achieve its long-term goal

of having a signifi cant impact on industrialisation. Innovation in

IDC’s context refers not only to innovation aimed at developing

and implementing strategies for industrial development, but also

innovation in terms of internal business processes to increase

effi ciencies and customer service.

IDC aims to inculcate an innovative culture in the Corporation.

Shortly after IDC made the decision to focus on improving

innovation (2010 fi nancial year) in the Corporation, an external

company conducted a survey at IDC to ascertain how staff

perceived their working environment in terms of innovation.

This baseline survey resulted in a low score of 41% for the

Corporation. The survey was conducted again in 2012 and resulted

in an improved score of 66.8%, with advancements in all of the

areas measured.


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For the year, four major initiatives were identifi ed to be rated under

the measurement for innovation, specifi cally:

• Electronic IDC business plan portal

• Automated standardised legal agreements

• Custom fi nancial models per sector

• Open and collaborative innovation

The fi rst three of these initiatives relate to internal processes and

the fourth to improvements in industry development. All except

for the custom fi nancial models were implemented, with an

additional innovation relating to assistance in setting up a hub in

which entrepreneurs will be put in contact with angel investors.

Overall, IDC is succeeding in creating an innovative culture and the

specifi c innovations focused on are substantially on track.

The details per performance indicator are shown in the tables

below:

Performance against short-term targets

Measurement area Indicator Measurement

Base target 2012

Stretch target 2012 Actual achieved


Achievement of industry development and regional integration milestones

% of industry and regional development milestones achieved

75% of milestones achieved



Contribution to investment in the economy

Value of funding agreements signed

R11.7 billion R21.7 billion R16.4 billion

Socio-economic impact

Jobs created/saved• Sub-minimum: Jobs

created/saved in rural areas

Number of jobs expected to be created or saved, counted at the time of agreements being signed

24 000(6 100 rural)

42 000(10 600 rural)

44 142(21 329 rural)

Financial sustainability and effi ciency

Ratio of administration costs to interest and fee income

Administration cost, including grants and donations, excluding impairments as a % of interest and fee income

Budgeted values (85%)

10% below budgeted values

(75%)

85%

Stakeholder relations

Turnaround time on transactions

Turnaround time on non-project transactions:

• New clients

• Existing clients

• Start-ups

• Expansions

(from date of application to date of agreement being signed; weight distributed according to actual number of transactions in each category)

213 days120 days203 days139 days

170 days96 days

163 days111 days

142 days100 days143 days119 days

Innovation Implementation of innovation initiatives

Qualitative assessment of impact on IDC’s ability to achieve its objectives through initiatives implemented

Implement priority innovation projects

Three out of four projects

implemented

96

Directors’ report (continued)


Performance against long-term targets

Measurement area Indicator Measurement

Base target 2012

Stretch target 2012 Actual achieved


Achievement of priority industry development goals and sustainability of jobs

Progress towards achieving long-term priority industry development goals

90% of goals for the year achieved

100% of goals for the year achieved

77% of goals achieved

Financial sustainability and effi ciency

Growth in reserves Five-year average growth in reserves (excluding portion of reserve related to the value of holdings in Sasol, Kumba Iron Ore, ArcelorMittal SA, BHP Billiton, Sappi)

CPI CPI + 3% CPI + 5.3%

Level of impairments Impairments as a % of the portfolio (at cost)

20% 18% 18.2%

Employee retention

Retention of high potential and high performing employees

Number of high potential employees and successors resigning as a % of total number of high potential employees and successors

10.8% 8.6% 7.2%

Stakeholder relations

IDC reputation Reptrak Pulse index value rating by relevant stakeholders (measured every two years)

50% 55% 73.1%

Innovation Entrenchment of an innovative culture across IDC

Change in the results of the IDC innovation survey (independently conducted)

45% 50% 66.8%

FundingThe IDC’s loan funding requirements are sourced mainly from

international development agencies and from commercial facilities

raised through the IDC’s relationships with commercial banks.

The IDC Mini Group's general funding requirements for

2012 amounted to R12.5 billion (2011: R7.7 billion), mainly

consisting of fi nancing advances of R8.5 billion and borrowing

redemptions of R3.8 billion. These requirements were partly

met out of R5.8 billion of internally-generated funds, namely

repayments received and profi ts. New borrowings were increased

to R7.1 billion for the year.

Corporate governanceThe IDC’s directors endorse the King III Report on Corporate

Governance and, during the review period, have endeavoured

to adhere to the recommendations of King III as far as possible.

The IDC’s adherences to these practices are outlined in the

Corporate Governance section of this annual report.

Public Finance Management ActThe IDC’s Board is responsible for the development of the

Corporation’s strategic direction. The Corporation’s strategy and

business plan are captured in the Shareholder’s Compact

and approved by the Board. After approval this is agreed with the

Economic Development Department and thereafter they form

the basis for the Corporation’s detailed action plans and ongoing

performance evaluation.

Operating within the guidelines established in the Shareholder’s

Compact, the IDC’s various business units prepare annual business

plans, budgets and capital programmes in order to meet their

objectives as outlined in their strategic plans.

The responsibility for the day-to-day management of the

Corporation vests in line management through a clearly defi ned

organisational structure and through formal delegated authorities.

The IDC has a comprehensive system of internal controls, which

are designed to ensure that the Corporation’s objectives are met,

including the requirements of the Companies Act and the

recommendations of King III. These systems and controls meet

the requirements of the Public Finance Management Act. There are

processes in place to ensure that where these controls fail, failure is

detected and corrected.


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Subsidiaries and joint venturesDetails of each trading subsidiary and joint venture are set out in

the notes to the fi nancial statements on pages 142 to 146.

DividendsA dividend of R50 million was paid during the fi nancial year.

On 26 June 2012 the directors declared a dividend of R50 million.

Valuation of sharesThe value of the Group’s investment in listed shares declined from

R56.9 billion at the end of the 2011 fi nancial year to R54.4 billion at

the end of the 2012 fi nancial year, due to decreases in the values of

shares traded on the stock market.

Post-reporting date events reviewThe value of the Group’s listed shares has decreased by R206 million

since year-end as a result of movements in the listed equities

market.

Share capitalThe authorised (R1.5 billion) and issued share capital (R1.4 billion)

remained unchanged during the year.

Audit Committee informationThe names of the Audit Committee members are refl ected on

pages 8 and 9. The meetings held and attendance record are

outlined in an earlier section of this annual report.

Directors and secretaryThe current directors of the IDC are refl ected on pages 8 and 9,

which also provides brief biographical details.

The name and registered offi ce of the secretary appears on the

inside back cover.

Materiality and Significance FrameworkMateriality levels for reporting in terms of section 55(2)(b)(i) of the PFMASection 55(2)(b)(i) of the PFMA states that the annual report and

fi nancial statements should include particulars of any material

losses through criminal conduct and irregular expenditure

and fruitless and wasteful expenditure that occurred during the

fi nancial year. The term material has not been defi ned in the Act.

The IDC adopted a defi nition in terms of the monetary impact for

the purposes of this section as R40 million.

Signifi cance levels related to sections 51(1)(g) and 54(2) of the PFMASections 51(1)(g) and 54(2) of the PFMA read in conjunction

with the related practice note requires the use of a signifi cance

framework. Based on the guidelines in the practice note and after

evaluating the total assets, total revenue and profi t after tax for the

IDC Group, a signifi cance level of R250 million had been adopted.

Declaration by the Group Company SecretaryIn terms of section 88(2)(e) of the Companies Act (2008) of South Africa, I certify that, to the best of my knowledge and belief, the IDC has

lodged with the Registrar of Companies for the fi nancial year ended 31 March 2012 all such returns as are required in terms of the Companies

Act, and that such returns are true, correct and up to date. In terms of section 19 of the IDC Act, No. 22 of 1940, as amended, I certify that for

the fi nancial year ended 31 March 2012, the IDC has lodged with the Minister of Economic Development the fi nancial statements in respect

of the preceding fi nancial year.

Ephy Moeti

Group Company Secretary

19 June 2012

98

Statements of fi nancial positionas at 31 March 2012


Group Company Figures in Rand million Notes 2012 2011 2012 2011

Assets

Cash and cash equivalents 4 7 825 5 828 7 117 5 237

Derivative fi nancial instruments 18 7 10 6 4

Trade and other receivables 5 1 267 907 275 224

Current tax receivable 121 55 56 –

Loans and advances 6 15 978 12 053 15 070 9 294

Investments 7 69 664 70 566 49 724 49 471

Inventories 11 1 860 1 251 10 11

Non -current assets held-for-sale 8 15 15 – –

Investments in subsidiaries 9 31 515 31 235

Investments in associates, partnerships and joint ventures 10 10 567 11 405 12 326 14 018

Deferred tax 12 22 20 – –

Investment property 13 117 100 9 9

Property, plant and equipment 14 4 772 4 587 110 150

Biological assets 15 14 8 – 4

Intangible assets 16 1 1 – –

Total assets 112 230 106 806 116 218 109 657

Equity and liabilities Equity Equity attributable to equity holders of the Group/company

Share capital 17 1 393 1 393 1 393 1 393

Reserves 56 175 60 330 68 219 69 570

Retained income 34 294 31 003 19 453 17 310

91 862 92 726 89 065 88 273

Non- controlling interest 331 342

Total equity 92 193 93 068 89 065 88 273

Liabilities Bank overdraft 4 3 14 – –

Derivative fi nancial instruments 18 5 11 3 8

Trade and other payables 19 2 286 1 544 846 692

Current tax payable – 18 – 16

Retirement benefi t obligation 37 265 214 135 112

Other fi nancial liabilities 20 9 923 6 677 17 814 13 895

Deferred tax 12 7 290 5 011 8 003 6 234

Provisions 21 208 201 48 53

Share -based payment liability 41 57 48 304 374

Total liabilities 20 037 13 738 27 153 21 384

Total equity and liabilities 112 230 106 806 116 218 109 657


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Statements of comprehensive incomefor the year ended 31 March 2012


Revenue 22/23 10 985 8 965 4 584 3 524

Cost of sales (4 317) (3 444) – (12)

Gross profit 6 668 5 521 4 584 3 512

Finance costs 24 (446) (346) (347) (315)

Gross profit after financing costs 6 222 5 175 4 237 3 197

Net capital gains 26 878 36 878 353

Other income 121 131 70 –

Operating expenses (3 809) (3 057) (2 957) (2 162)

Operating profit 27 3 412 2 285 2 228 1 388

Income from equity accounted investments (2) 633 (6) (7)

Profit before taxation 3 410 2 918 2 222 1 381

Taxation 29 (107) (206) (29) (83)

Profit for the year 3 303 2 712 2 193 1 298

Other comprehensive income:

Available-for-sale financial assets adjustments (214) 12 244 543 11 639

Losses on property revaluation (62) (185) 9 (12)

Exchange differences on translating foreign operations 340 (242)

Share of comprehensive income of associates (1 902) (317) (38) 22

Taxation related to components of other comprehensive income (2 317) (614) (1 865) (1 113)

Other comprehensive (loss)/income for the year, net of taxation 39 (4 155) 10 886 (1 351) 10 536

Total comprehensive (loss)/income (852) 13 598 842 11 834

Profit for the year attributable to:

Owners of the parent 3 341 2 701 2 193 1 298

Non-controlling interest (38) 11

3 303 2 712 2 193 1 298

Total comprehensive (loss)/income attributable to:

Owners of the parent (814) 13 587 842 11 834

Non-controlling interest (38) 11

(852) 13 598 842 11 834


Statements of changes in equityfor the year ended 31 March 2012

Figures in Rand million

Total share

capital

Foreign currency

trans-lation

reserve

Associ-ated

entities reserve

Revalu- ation

reserve

Share-based

payment reserve

Retained income

Total attribut-

able to equity

holders of the

group/ company

Non-control-

ling interest

Total equity

Group

Balance at 31 March 2010 1 393 (22) 3 605 45 557 304 28 352 79 189 366 79 555

Changes in equity

Total comprehensive income for the year – (242) (317) 11 445 – 2 701 13 587 11 13 598

Transactions with non-controlling shareholders – – – – – – – (35) (35)

Distributions to owners of the company

Dividends – – – – – (50) (50) – (50)

Total changes – (242) (317) 11 445 – 2 651 13 537 (24) 13 513

Balance at 31 March 2011 1 393 (264) 3 288 57 002 304 31 003 92 726 342 93 068 Changes in equity Total comprehensive income for the year – 340 (1 902) (2 593) – 3 341 (814) (38) (852)Transactions with non-controlling shareholders – – – – – – – 27 27Distributions to owners of the company Dividends – – – – – (50) (50) – (50)

Total changes – 340 (1 902) (2 593) – 3 291 (864) (11) (875)

Balance at 31 March 2012 1 393 76 1 386 54 409 304 34 294 91 862 331 92 193

Note(s) 17 39 39 39 39 39

Company

Balance at 31 March 2010 1 393 – 84 58 950 – 16 062 76 489 – 76 489

Changes in equity

Total comprehensive income for the year – – 22 10 514 – 1 298 11 834 – 11 834

Distributions to owners of the company

Dividends – – – – – (50) (50) – (50)

Total changes – – 22 10 514 – 1 248 11 784 – 11 784

Balance at 31 March 2011 1 393 – 106 69 464 – 17 310 88 273 – 88 273 Changes in equity Total comprehensive income for the year – – (38) (1 313) – 2 193 842 – 842Distributions to owners of the company Dividends – – – – – (50) (50) – (50)

Total changes – – (38) (1 313) – 2 143 792 – 792

Balance at 31 March 2012 1 393 – 68 68 151 – 19 453 89 065 – 89 065

Note(s) 17 39 39 39 39


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Statements of cash fl owsfor the year ended 31 March 2012


Cash flows from operating activities

Cash (used in)/generated from operations 31 (840) 474 (680) (941)

Interest received 1 562 1 318 1 572 1 329

Dividends received 2 918 2 255 2 308 1 879

Finance costs (388) (236) (347) (205)

Tax (paid)/received 32 (217) 236 (197) 281

Changes in operating funds (1 366) 1 732 (2 543) 2 971

Increase on operating assets 6 (4 606) (1 360) (6 457) (768)

Increase in operating liabilities 3 240 3 092 3 914 3 739

Net cash from operating activities 1 669 5 779 113 5 314

Cash flows from investing activities

Purchase of property, plant and equipment 14 (814) (993) (9) (29)

Sale of property, plant and equipment 14 49 6 37 –

Purchase of investment property 13 (17) – – –

Purchase of other intangible assets 16 (1) (202) – –

Proceeds on sale of other intangible assets 16 – 1 – –

Acquisition of investments (801) (1 585) (191) (2 225)

Purchase of biological assets 15 (5) (4) – (4)

Proceeds on sale of biological assets 15 – 5 4 5

Purchase of other assets – (6) (2) (1)

Proceeds on realisation of investments 1 978 – 1 978 –

Net cash from/(used in) investing activities 389 (2 778) 1 817 (2 254)

Cash flows used in financing activities

Dividends paid (50) (50) (50) (50)

Net cash used in financing activities (50) (50) (50) (50)

Net increase in cash and cash equivalents 2 008 2 951 1 880 3 010

Cash at the beginning of the year 5 814 2 863 5 237 2 227

Total cash at the end of the year 4 7 822 5 814 7 117 5 237


Segmental report – Primary segmentsfor the year ended 31 March 2012

Industrial Development Corporation

Other fi nancing activities

Foskor (Pty) Limited Other Total

Figures in Rand million 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

Income

Interest received 1 572 1 329 6 7 27 24 (43) (42) 1 562 1 318

Dividends received 2 663 1 895 692 410 – – (82) (34) 3 273 2 271

Fee income 349 277 – – – – – (1) 349 276

Farming, manufacturing and mining income – 23 – – 5 125 4 611 676 466 5 801 5 100

Revenue* 4 584 3 524 698 417 5 152 4 635 551 389 10 985 8 965

Share of profi ts of equity-accounted – 20 – – 3 3 454 1 497 457 1 520

investments

Other income – – – – 75 90 46 41 121 131

Net capital gains 878 353 – – – (6) – (311) 878 36

Expenses

Financing costs (347) (315) (3) – (97) (28) 1 (3) (446) (346)

Operating expenses (1 097) (948) (1) (7) (4 702) (3 924) (930) (635) (6 730) (5 514)

Share of losses of equity-accounted investments (6) (27) – – – – (453) (860) (459) (887)

Taxation (29) (83) (1) (2) (79) (165) 2 44 (107) (206)

Depreciation (21) (25) – – (238) (210) (49) (38) (308) (273)

Project feasibility expenses (153) (163) – – – – 44 152 (109) (11)

Net movement in impairments (1 616) (1 026) – 1 – – 567 354 (1 049) (671)

Impairment of property, plant and – (12) – – – – – (20) – (32)

equipment

Impairment reversal – – – – 70 – – – 70 –

Profit for the year 2 193 1 298 693 409 184 395 233 610 3 303 2 712

Total assets 116 218 109 657 426 447 6 939 5 571 (11 353) (8 869) 112 230 106 806

Interest in equity-accounted investments 12 326 14 018 – – 24 21 (1 783) (2 634) 10 567 11 405

Total liabilities 27 153 21 384 42 66 2 881 1 607 (10 039) (9 319) 20 037 13 738

Capital expenditure 6 29 – – 408 596 400 309 814 934

Capital expenditure commitments – – – – 325 167 32 11 357 178

* All revenue is from external customers.

Other fi nancing activities – includes Findevco, Impofi n, Konoil and The Export-Import Finance Corporation of SA.

Other – includes Dymson Nominee, Kindoc Investments, Kindoc Sandton Properties, Konbel, Prilla 2000, certain other subsidiaries and consolidation adjustments.


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Segmental report – Secondary segmentsfor the year ended 31 March 2012

South Africa Rest of Africa Other TotalFigures in Rand million 2012 2011 2012 2011 2012 2011 2012 2011

Income

Interest received 1 364 1 128 188 179 10 11 1 562 1 318

Dividends received 3 253 2 249 – 7 20 15 3 273 2 271

Fee income 349 276 – – – – 349 276

Farming, manufacturing and mining income 5 801 5 100 – – – – 5 801 5 100

Revenue* 10 767 8 753 188 186 30 26 10 985 8 965

Share of profi ts of equity-accounted investments 368 1 324 89 196 – – 457 1 520

Other income 121 131 – – – – 121 131

Net capital gains 878 36 – – – – 878 36

Expenses

Financing expenses (446) (346) – – – – (446) (346)

Operating expenses (6 730) (5 514) – – – – (6 730) (5 514)

Share of losses of equity-accounted investments (423) (887) (36) – – – (459) (887)

Taxation (107) (206) – – – – (107) (206)

Depreciation (308) (273) – – – – (308) (273)

Impairment of property, plant and equipment – (32) – – – – – (32)

Net movement in impairments (1 049) (671) – – – – (1 049) (671)

Project feasibility expenses (109) (11) – – – – (109) (11)

Impairment reversal 70 – – – – – 70 –

Profit for the year 3 032 2 304 241 382 30 26 3 303 2 712

Total assets 108 304 100 579 3 011 5 312 915 915 112 230 106 806

Interest in equity-accounted investments 7 692 9 086 2 875 2 319 – – 10 567 11 405

Total liabilities 20 037 13 738 – – – – 20 037 13 738

Capital expenditure 814 934 – – – – 814 934

Capital expenditure commitments 357 178 – – – – 357 178

* All revenue is from external customers.

Other – includes all countries outside the African continent.

Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions.

The Executive Committee considers the business primarily from a product perspective. The products are segmented into fi nancing activities and non-fi nancing activities Segment assets consist primarily of loans, advances, investments, property, plant and equipment and cash and cash equivalents.

Segment liabilities comprise non-current and current liabilities.

Capital expenditure comprises additions to property, plant and equipment.


Notes to the fi nancial statementsfor the year ended 31 March 2012

1. Accounting policiesThe Industrial Development Corporation of South Africa

Limited (IDC or the Corporation) is domiciled in South Africa.

The consolidated fi nancial statements for the year ended

31 March 2012 comprise the IDC, its subsidiaries and the

Group’s interest in associates and jointly controlled entities

(referred to as the Group).

The fi nancial statements were authorised for issue by the

directors on 26 June 2012.

These accounting policies are consistent with the previous

period.

1.1 Statement of complianceThe separate and consolidated fi nancial statements

have been prepared in accordance with and comply

with International Financial Reporting Standards

(IFRS) and its interpretations adopted by the

International Accounting Standards Board (IASB) as

well as the requirements of the requirements of the

Public Finance Management Act (Act No. 1 of 1999),

as amended.

1.2 Basis of preparationThe separate and consolidated fi nancial statements

are presented in South African Rand, which is the

Group’s functional currency, rounded to the nearest

million.

These consolidated fi nancial statements are prepared

on the historical cost basis, except for the following:

• Derivative fi nancial instruments are measured at

fair value

• Financial instruments held-for-trading are

measured at fair value

• Financial instruments classifi ed as available-for-sale

are measured at fair value

• Biological assets are measured at fair value less

point-of-sale costs

• Investment property is measured at fair value

• Land and buildings are measured at fair value

• Financial instruments designated at fair value

through profi t or loss are measured at fair value

• Investments in subsidiaries, associates and jointly-

controlled entities are carried at fair value in the

separate fi nancial statements of the company

International Financial Reporting Standards, amendments and interpretations eff ective for the fi rst time in the current year:• Improvements to IFRS (Issued May 2010)

(Eff ective 1 January 2011). Improvements to IFRSs

(Issued May 2010) was issued by the IASB as part

the ‘annual improvements process’ resulting in

11 amendments to six standards

• Amendment to IAS 24: Related Party Disclosures

(Eff ective 1 January 2011). This amendment

provides partial relief from the requirement for

government-related entities to disclose details

of all transactions with the government and other

government-related entities. It also clarifi es and

simplifi es the defi nition of a related party

• IFRIC 19: Extinguishing Financial Liabilities with

Equity Instruments (Eff ective 1 July 2010). This IFRIC

clarifi es the accounting when an entity renegotiates

the terms of its debt with the result that the liability

is extinguished through the debtor issuing its own

equity instruments to the creditor. A gain or loss is

recognised in the profi t and loss account based on

the fair value of the equity instruments compared

to the carrying amount of the debt

Standards, amendments and interpretations to existing standards not yet eff ective and also not early adopted• Amendment to IFRS 7: Disclosures – Transfer

of Financial Assets (Eff ective 1 July 2011).

The amendments are intended to address

concerns raised during the fi nancial crisis by the

G20, among others, that fi nancial statements did

not allow users to understand the ongoing risks

the entity faced due to derecognised receivables

and other fi nancial assets

• IFRS 9: Financial Instruments (Eff ective 1 January

2015). This IFRS is part of the IASB’s project to

replace IAS 39. IFRS 9 addresses classifi cation and

measurement of fi nancial assets and replaces the

multiple classifi cation and measurement models

in IAS 39 with a single model that has only two

classifi cation categories: amortised cost and fair

value

• IFRS 11: Joint Arrangements (Eff ective 1 January

2013) – IFRS 11 replaces IAS 31: Interests in Joint


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Ventures. It requires a party to a joint arrangement

to determine the type of joint arrangement in which

it is involved by assessing its rights and obligations

and then account for those rights and obligations in

accordance with that type of joint arrangement

• IFRS 12: Disclosure of Interests in Other Entities

(Eff ective 1 January 2013) – This standard requires

extended disclosure of information that will enable

users of fi nancial statements to evaluate the nature

of, and risks associated with, interests in other

entities and the eff ects of those interests on an

entity’s fi nancial position, fi nancial performance

and cash fl ows

• IFRS 13: Fair-value Measurement (Eff ective

1 January 2013) – This standard replaces

the guidance on fair-value measurement in the

various existing IFRS accounting conceptual

framework, standards and interpretations with a

single standard. IFRS 13 defi nes fair value, provides

guidance on how to determine fair value and the

required disclosures of fair value measurements.

However, IFRS 13 does not change the requirements

regarding which assets and liabilities should be

measured or disclosed at fair value. IFRS 13 applies

when another standard or interpretation requires or

permits fair-value measurements or disclosures of

fair-value measurements. With certain exceptions,

the standard requires entities to classify these

measurements into a ‘fair-value hierarchy’ based on

the nature of the inputs

• Amendment to IAS: 1 Presentation of Financial

Statements (Eff ective 1 January 2013) –

The following amendments are required:

° Items presented in other comprehensive

income are to be grouped, based on whether

such items are potentially reclassifi able to

profi t or loss subsequently, i.e. those that

might be reclassifi ed and those that will not

be reclassifi ed

° Tax associated with items presented before tax

is to be disclosed separately for each of the two

groups of other comprehensive income items

(without changing the option to present such

items of other comprehensive income either

before tax or net of tax)

• IASB Annual Improvement Project – As part of

its fourth annual improvement project the IASB

has issued its 2011 edition of improvements.

The annual improvement project aims to clarify

and improve the current accounting standards.

The improvements include items involving

terminology or editorial changes, with minimal

eff ect on recognition and measurement.

1.3 Investments in subsidiaries Subsidiaries are entities controlled by the IDC.

Control exists when the IDC has the power, directly

or indirectly, to govern the fi nancial and operating

policies of an entity so as to obtain benefi ts from its

activities. In assessing control, potential voting rights

that are presently exercisable or convertible are taken

into account. The fi nancial statements of subsidiaries

are included in the consolidated fi nancial statements

from the date that control commences until the date

that control ceases.

The acquisition method of accounting is used to

account for the acquisition of subsidiaries by the

Group. The cost of an acquisition is measured as

the fair value of the assets given, equity instruments

issued and liabilities incurred or assumed at the date

of exchange. The assets, liabilities and contingent

liabilities acquired are assessed and included in the

statement of fi nancial position at their estimated

fair value to the Group. If the cost of acquisition is

higher than the net assets acquired, any diff erence

between the net asset value and the cost of

acquisition of a subsidiary is treated in accordance

with the Group’s accounting policy for goodwill.

If the cost of acquisition is less than the fair value

of the net assets of the subsidiary acquired, the

diff erence is recognised directly in the statement of

comprehensive income.

Inter-company transactions, balances and unrealised

gains on transactions between Group companies are

eliminated on consolidation.

Unrealised losses are eliminated in the same way as

unrealised gains, but only to the extent that there is

no evidence of impairment.

Investments in subsidiaries in the company’s separate

fi nancial statements are carried at fair value as

available-for-sale fi nancial assets.

1.4 Special-purpose entitiesThe Group has established a number of special-

purpose entities (SPEs) for trading and investment

purposes. SPEs are entities that are created to

accomplish narrow and well-defi ned objectives.

A SPE is consolidated if, based on an evaluation


Notes to the fi nancial statements (continued)for the year ended 31 March 2012

of the substance of the relationship with the Group

and the SPEs risks and rewards, the Group concludes

that it controls the SPE. SPEs controlled by the Group

are generally those established under terms that

impose strict limitations on the decision-making

powers of the SPEs’ management and that result

in the Group receiving the majority of the benefi ts

related to the SPEs’ operations and net assets.

Investments in SPEs in the company’s separate

fi nancial statements are carried at fair value.

1.5 Investments in associatesInvestments in associates are all entities over which

the Group has signifi cant infl uence but not control,

generally accompanying a shareholding of between

20% and 50% of the voting rights. Investments

in associates are accounted for using the equity

method of accounting and are initially recognised at

cost. The Group’s investment in associates includes

goodwill identifi ed on acquisition, net of any

accumulated impairment loss.

The Group’s share of its associates’ post-acquisition

profi ts and losses is recognised in the statement

of comprehensive income, and its share of post-

acquisition movements in reserves is recognised in

reserves. The cumulative post-acquisition movements

are adjusted for against the carrying amount of

the investment. When the Group’s share of losses

in an associate equals or exceeds its interest in the

associate, including any other unsecured receivables,

the Group does not recognise further losses, unless it

has incurred obligations or made payments on behalf

of the associate.

Unrealised gains and losses arising from transactions

with equity-accounted investments are eliminated

against the investment to the extent of the Group’s

interest in the investment. Unrealised losses are

eliminated only to the extent that there is no evidence

of impairment.

Investments in incorporated associates in the

company’s separate fi nancial statements are carried

at fair value.

Profi ts and losses arising in investments in associates

are recognised in the statement of comprehensive

income.

1.6 Joint ventures and partnershipsJoint ventures and partnerships are those entities

over whose activities the Group has joint control,

established by contractual agreement and requiring

unanimous consent for strategic and operating

decisions. The consolidated fi nancial statements

include the Group’s share of the total recognised gains

and losses of joint ventures on an equity-accounted

basis, from the date that joint control is established by

contractual agreement commences until the date that

it ceases. When the Group’s share of losses exceeds

its interest in a joint venture, the Group’s carrying

amount is reduced to nil and recognition of further

losses is discontinued, except to the extent that the

Group has incurred legal or constructive obligations

or made payments on behalf of a joint venture.

Unrealised gains and losses arising from transactions

with equity-accounted joint ventures and

partnerships are eliminated against the investment to

the extent of the Group’s interest in the investment.

Investments in incorporated joint ventures and

partnerships in the company’s separate fi nancial

statements are carried at fair value.

1.7 Financial instruments

1.7.1 Financial assetsThe Group classifi es its fi nancial assets into

the following categories: fi nancial assets at

fair value through profi t or loss; loans and

receivables; held-to-maturity investments;

and available-for-sale fi nancial assets.

Management determines the classifi cation

of its fi nancial assets at initial recognition.

Financial assets at fair value through profi t or lossThis category has two sub-categories:

fi nancial assets held-for-trading and those

designated at fair value through profi t or loss

at inception.

A fi nancial asset is classifi ed in this category

if acquired principally for the purpose of

selling in the short term or if so designated by

management. Derivatives are also categorised

as held-for-trading unless they are designated

as hedging instruments.


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The Group designates fi nancial assets at fair

value through profi t or loss when either:

• The assets are managed, evaluated and

reported internally on a fair value basis

• The designation eliminates or signifi cantly

reduces an accounting mismatch which

would otherwise arise

• The asset contains an embedded

derivative that signifi cantly modifi es

the cash fl ows that would otherwise be

required under the contract

Loans and receivablesLoans and receivables are non-derivative

assets with fi xed or determinable payments

that are not quoted in an active market other

than those that the Group intends to sell in

the near future. They arise when the Group

provides money, goods or services directly

to a debtor with no intention of trading the

receivable.

Held-to-maturityHeld-to-maturity investments are non-

derivative fi nancial assets with fi xed or

determinable payments and fi xed maturity

that the Group has the positive intent and

ability to hold to maturity. If the Group were

to sell other than an insignifi cant amount of

held-to-maturity assets, the entire category

would be tainted and reclassifi ed as available-

for-sale.

Available-for-saleAvailable-for-sale investments are non-

derivative investments that are not

designated as another category of fi nancial

assets. Available-for-sale investments are

those intended to be held for an indefi nite

period of time, which may be sold in response

to needs for liquidity or changes in interest

rates, exchange rates or equity prices.

Recognition and measurementPurchases and sales of fi nancial assets at fair

value through profi t or loss, held-to-maturity

and available-for-sale are recognised on

trade date – the date on which the Group

commits to purchase or sell the asset. Loans

are recognised when the cash is advanced

to the borrowers. Financial assets are initially

recognised at fair value plus transaction costs

for all fi nancial assets not carried at fair value

through profi t or loss.

Available-for-sale fi nancial assets and fi nancial

assets at fair value through profi t or loss are

subsequently carried at fair value. Loans and

receivables and held-to-maturity investments

are carried at amortised cost using the eff ective

interest rate method less impairment loss. Gains

and losses arising from changes in the fair value

of the fi nancial instruments through profi t or

loss category are included in the statement

of comprehensive income in the period in

which they arise. Gains and losses arising from

changes in the fair value of available-for-sale

fi nancial assets are recognised directly in other

comprehensive income, until the fi nancial

asset is disposed of, derecognised or impaired,

at which time the cumulative gain or loss

previously recognised in other comprehensive

income should be recognised in profi t or loss.

However, interest calculated using the eff ective

interest method is recognised in the statement

of comprehensive income for available-for-sale

debt investments. Dividends on available-for-

sale equity instruments are recognised in the

statement of comprehensive income when the

entity’s right to receive payment is established.

Financial assets (or, where applicable, a part

of a fi nancial asset or part of a group of similar

fi nancial assets) are derecognised when the

contractual rights to receive cash fl ows from

the fi nancial assets have expired or where the

Group has transferred substantially all the risks

and rewards of ownership, without retaining

control. Any interest in the transferred

fi nancial assets that is created or retained by

the Group is recognised as a separate asset

or liability.

The fair values of quoted investments in

active markets are based on current bid

prices.



If the market for a fi nancial asset is not

active (and for unlisted securities), the Group

establishes fair value by using valuation

techniques. These include the use of recent

arm’s length transactions, discounted cash

fl ow analysis, option pricing models and

other valuation techniques commonly used

by market participants. Any instrument that

does not have a quoted market price in an

active market and whose fair value cannot

be reliably measured is stated at its cost,

including transaction costs, less impairment.

1.7.2 Financial liabilitiesFinancial liabilities are recognised initially at

fair value, generally being their issue proceeds

net of transaction costs incurred. Financial

liabilities, other than those at fair value

through profi t or loss, are subsequently stated

at amortised cost and interest is recognised

over the period of the borrowing using the

eff ective interest rate method.

Where the Group classifi es certain liabilities

at fair value through profi t or loss, changes in

fair value are recognised in the statement of

comprehensive income. This designation by

the Group takes place when either:

• The liabilities are managed, evaluated and

reported internally on a fair value basis, or

• The designation eliminates or signifi cantly

reduces an accounting mismatch which

would otherwise arise, and

• The liability contains an embedded

derivative that signifi cantly modifi es

the cash fl ows that would otherwise be

required under the contract

A fi nancial liability is derecognised when the

obligation under the liability is discharged,

cancelled or expires. Where an existing

fi nancial liability is replaced by another from

the same lender on substantially diff erent

terms, or the terms of an existing liability are

substantially modifi ed, such an exchange or

modifi cation is treated as a derecognition

of the original liability and the recognition

of a new liability, and the diff erence in the

respective carrying amounts is recognised

in profi t or loss.

Financial guaranteesFinancial guarantees are contracts that

require the Group to make specifi ed

payments to reimburse the holder for a loss

it incurs because a specifi ed debtor fails to

make payment when due in accordance

with the terms of a debt instrument.

Financial guarantee liabilities are initially

recognised at their fair value and the initial

fair value is amortised over the life of the

fi nancial guarantee. The guarantee liability

is subsequently carried at the higher of this

amortised amount and the present value

of any expected payment (when payment

under the guarantee has become probable).

Financial guarantees are included with other

liabilities.

1.7.3 Off setting of fi nancial instrumentsFinancial assets and liabilities are off set and

the net amount reported in the statement

of fi nancial position when there is a legally

enforceable right to off set the recognised

amounts and there is an intention to settle

on a net basis, or realise the asset and settle

the liability simultaneously. Income and

expenses are presented on a net basis only

when permitted by the accounting standards,

or for gains and losses arising from a group

of similar transactions such as in the Group’s

trading activity.

1.7.4 Derivative fi nancial instrumentsCertain Group companies use derivative

fi nancial instruments to hedge their

exposure to foreign exchange rate risks and

other market risks arising from operational,

fi nancing and investment activities.

The Group does not hold or issue derivative

fi nancial instruments for trading purposes.

The derivatives that do not meet the

requirements for hedge accounting are

accounted for as trading instruments.


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Embedded derivativesDerivatives may be embedded in another

contractual arrangement (a ‘host contract’).

The Group accounts for an embedded

derivative separately from the host contract

when the host contract is not itself carried

at fair value through profi t or loss, the

terms of the embedded derivative would

meet the defi nition of a derivative if they

were contained in a separate contract, and

the economic characteristics and risks of the

embedded derivative are not closely related

to the economic characteristics and risk of

the host contract. Separated embedded

derivatives are accounted for depending on

their classifi cation, and are presented in the

statement of fi nancial position together with

the host contract.

Hedge accountingThe following hedge relationships are applied:

Fair value hedge – a hedge of exposure

to changes in fair value of a recognised

asset or liability or an unrecognised fi rm

commitment, or an identifi ed portion of such

an asset, liability or fi rm commitment, that is

attributable to a particular risk and could aff ect

profi t or loss.

Cash fl ow hedge – a hedge of the exposure

to variability in cash fl ows that is attributable

to a particular risk associated with a recognised

asset or liability or a highly probable forecast

transaction and could aff ect profi t or loss.

Fair value hedgeFair value, with changes in fair value

recognised in the statement of


Any adjustments to the carrying amount

related to the hedged risk are recognised in

the statement of comprehensive income.

Cash fl ow hedgeFair value, with the eff ective portion

of changes in its fair value, recognised

directly in a separate component of equity

through the statement of changes in

equity and the ineff ective portion of the

gain or loss, is recognised in the statement

of comprehensive income. The change

in fair value recognised directly in other

comprehensive income is transferred to the

statement of comprehensive income when

the future transaction aff ects profi t or loss.

No adjustments are made to the carrying

amount of the hedged item.

Discontinuation of hedge accountingThe Group discontinues hedge accounting

prospectively if any one of the following occurs:

• The hedging instrument expires or is sold,

terminated or exercised

• The forecast transaction is no longer

expected to occur (in the case of a cash

fl ow hedge, the cumulative unrealised

gain or loss recognised in equity is

recognised immediately in the statement

of comprehensive income)

• The hedge no longer meets the

conditions for hedge accounting

• The Group revokes the designation

1.8 Impairment of assetsImpairment of fi nancial assets carried at amortised costThe Group assesses whether there is objective evidence

that a fi nancial asset or Group of fi nancial assets not

carried at fair value through profi t or loss are impaired

at each reporting date. A fi nancial asset or group of

fi nancial assets is impaired and impairment losses are

incurred if, and only if, there is objective evidence of

impairment as a result of one or more events that have

occurred after the initial recognition of the asset (a loss

event) and that loss event (or events) has an impact on

the estimated future cash fl ows of the fi nancial asset or

group of fi nancial assets that can be reliably estimated.

Impairment losses are recognised in the statement of

comprehensive income and refl ected in an allowance

account against loans and advances.



Objective evidence that a fi nancial asset or group

of assets is impaired includes observable data that

comes to the attention of the Group about the

following loss events:

• Signifi cant fi nancial diffi culty of the issuer or

obligor

• A breach of contract, such as default or

delinquency in interest or principal payments

• The Group granting to the borrower, for economic

or legal reasons relating to the borrower’s fi nancial

diffi culty, a concession that the lender would not

otherwise consider

• It becoming probable that the borrower will enter

bankruptcy or other fi nancial re-organisation

• The disappearance of an active market for that

fi nancial asset resulting in fi nancial diffi culties

• Observable data indicating that there is a

measurable decrease in the estimated future

cash fl ows from a group of fi nancial assets since

the initial recognition of those assets, although

the decreases cannot yet be identifi ed with the

individual fi nancial assets in the Group

The Group fi rst assesses whether objective evidence

of impairment exists individually for fi nancial assets

that are individually signifi cant, referred to as specifi c

impairments, and individually or collectively for

fi nancial assets that are not individually signifi cant.

If the Group determines that no objective evidence of

impairment exists for an individually assessed fi nancial

asset, whether signifi cant or not, it includes the asset

in a group (portfolio) of fi nancial assets with similar

credit risk characteristics and collectively assesses

them for impairment. Assets that are individually

assessed for impairment and for which an impairment

loss is, or continues to be, recognised are not included

in a collective assessment of impairment.

The amount of specifi c impairments raised is the

amount needed to reduce the carrying value of

the asset to the present value of the expected

ultimate fair value less costs to sell, taking into

consideration the fi nancial status of the underlying

client and any security in place for the recoverability

of the fi nancial asset.

The recoverable amount of the assets is calculated

as the present value of estimated future cash fl ows,

discounted at the original eff ective interest rate

(i.e. the eff ective interest rate computed at initial

recognition of the asset).

For the purpose of a collective evaluation of

impairment, fi nancial assets are grouped on the basis

of similar credit risk characteristics (i.e. on the basis of

the Group’s grading process that considers asset

type, industry, geographical location, collateral type,

past-due status and other relevant factors). Those

characteristics are relevant to the estimation of future

cash fl ows for groups of such assets by being indicative

of the debtors’ ability to pay all amounts due according

to the contractual terms of the assets being evaluated.

Future cash fl ows in a group of fi nancial assets that are

collectively evaluated for impairment are estimated on

the basis of the contractual cash fl ows of the assets in

the group, and as well as historical loss experience for

assets with credit risk characteristics similar to those in

the group. Historical loss experience is adjusted on the

basis of current observable data to refl ect the eff ects

of current conditions which did not aff ect the period

on which the historical loss experience is based.

This also serves to remove the eff ects of conditions in

the historical period that do not exist currently.

Estimates of changes in future cash fl ows for

groups of assets should refl ect and be directionally

consistent with changes in related observable

data from period to period (for example, changes

in interest rates, foreign currency exchange rates,

payment status, or other factors indicative of changes

in the probability of losses in the group and their

magnitude). The methodology and assumptions used

for estimating future cash fl ows are reviewed regularly

by the Group to reduce any diff erences between loss

estimates and actual loss experience.

If an impairment loss decreases due to an event

occurring subsequently and the decrease can be

related objectively to an event occurring after the

impairment was recognised (such as an improvement

in the debtor’s credit rating), then the previously

recognised impairment loss is reversed through profi t

or loss with a corresponding increase in the carrying

amount of the underlying asset. The reversal is limited

to an amount that does not state the asset at more

than what its amortised cost would have been in the

absence of impairment.

Impairment of available-for-sale fi nancial assetsThe Group assesses at each reporting date whether

there is objective evidence that a fi nancial asset or

a group of fi nancial assets is impaired. In the case of

equity investments classifi ed as available-for-sale, a


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signifi cant or prolonged decline in the fair value of

the instrument below its cost is an indication of an

impairment.

If any such evidence exists for available-for-sale

fi nancial assets, the cumulative loss – measured as

the diff erence between the acquisition cost and

the current fair value, less any impairment loss on

that fi nancial asset previously recognised in profi t or

loss – is removed from equity and recognised in the

statement of comprehensive income. Impairment

losses recognised in the statement of comprehensive

income on equity instruments are not reversed

through the statement of comprehensive income.

Any increase in the fair value after an impairment loss

has been recognised is treated as a revaluation and is

recognised directly in other comprehensive income.

If, in a subsequent period, the fair value of a debt

instrument classifi ed as available-for-sale increases and

the increase can be objectively related to an event

occurring after the impairment loss was recognised in

profi t or loss, the impairment loss is reserved through

the statement of comprehensive income.

Impairment of non-fi nancial assetsThe carrying amounts of the Group’s non-fi nancial

assets, other than biological assets, land and buildings,

deferred tax assets and investment property, are

reviewed at each reporting date to determine

whether there is any indication of impairment. If such

indication exists, the assets’ recoverable amount is

estimated.

An impairment loss is recognised whenever the

carrying amount of an asset or its cash-generating

unit exceeds its recoverable amount.

An impairment loss of assets carried at cost less

any accumulated depreciation or amortisation

is recognised immediately in profi t or loss. Any

impairment loss of a revalued asset is treated as

a revaluation decrease.

1.9 Cash-generating unitsA cash-generating unit is the smallest group of assets

that generates cash infl ows from continuing use that

are largely independent of the cash infl ows of other

assets or group of assets.

For an asset whose cash fl ows are largely dependent

on those of other assets, the recoverable amount is

determined for the cash-generating unit to which

the asset belongs. The recoverable amount of a

cash-generating unit is the greater of its value in use

and its fair value less costs to sell. Impairment losses

recognised in respect of cash-generating units are

allocated fi rst to reduce the carrying amount of any

goodwill allocated to cash-generating units and

then to reduce the carrying amount of the other

assets in the unit (group of units) on a pro rata basis.

Impairment losses are recognised in profi t or loss.

1.10 GoodwillThe recoverable amount for goodwill is estimated

at each reporting date. Impairment losses are

recognised in the statement of comprehensive

income. Impairment losses relating to goodwill are

not reversed.

1.11 Other non-fi nancial assetsThe recoverable amount of other non-fi nancial

assets is the greater of fair value less cost to sell

and its value in use. Fair value less cost to sell is the

amount obtainable from the sale of an asset or

cash-generating unit in an arm’s length transaction

between knowledgeable, willing parties, less the costs

of disposal. In assessing value in use, the expected

future cash fl ows from the asset are discounted to

their present value using a pre-tax discount rate that

refl ects current market assessments of the time value

of money and the risks specifi c to the asset. For an

asset that does not generate largely independent cash

infl ows, the recoverable amount is determined for the

cash-generating unit to which the asset belongs.

Impairment losses are recognised in the statement

of comprehensive income, except to the extent

that they reduce revaluations recognised in other


The recoverable amount for intangible assets that have

an indefi nite useful life or intangible assets that are not

yet available-for-use is estimated at each reporting date.

Impairment losses recognised in the prior periods are

assessed at each reporting date for any indications

that the loss has decreased or no longer exists.

An impairment loss is reversed if there has been

a change in the estimates used to determine the

recoverable amount and only to the extent that

the asset’s carrying amount does not exceed the

carrying amount that would have been determined,

net of depreciation or amortisation, if no impairment

loss had been recognised.



1.12 Intangible assetsGoodwillAll business combinations are accounted for by

applying the purchase method. Goodwill acquired in

a business combination is initially measured at cost,

being the diff erence between the cost of the business

combination over the interest of IDC in the fair value

of the net identifi able assets acquired.

Negative goodwill arising on acquisition is recognised

directly in the statement of comprehensive income.

Goodwill is subsequently stated at cost less any

accumulated impairment losses. Goodwill is allocated

to cash-generating units and tested annually for

impairment or more frequently if events or changes

in circumstances indicate that it might be impaired.

Gains and losses on the disposal of an entity include

the carrying amount of goodwill relating to the entity

sold.

1.13 Foreign currency translationTransactions and balancesTransactions in foreign currencies are translated into

South African Rand at the foreign exchange rate

prevailing at the date of the transaction. The foreign

currency gain or loss on monetary items is the

diff erence between amortised cost in the functional

currency at the beginning of the period, adjusted for

eff ective interest and payments during the period,

and amortised cost in foreign currency translated at

the exchange rate at the end of the reporting period,

if applicable.

Monetary assets and liabilities denominated in foreign

currencies at the reporting date have been translated

into South African Rand at the rates ruling at that date.

Non-monetary assets and liabilities that are measured

in terms of historical cost in a foreign currency are

translated using the exchange rate at the date of

the transaction. Non-monetary assets and liabilities

denominated in foreign currencies that are stated at

fair value are translated to Rand at foreign exchange

rates ruling at the dates the fair value was determined.

Foreign exchange diff erences arising on translation


income.

Financial statements of foreign operationsAll foreign operations have been accounted for as

foreign operations. Assets and liabilities of foreign

operations, including goodwill and fair value

adjustments arising on consolidation are translated

into South African Rand at foreign exchange rates

ruling at the reporting date. Income and expenses

are translated at the average foreign exchange

rates, provided these rates approximate the actual

rates, for the year. Exchange diff erences arising from

the translation of foreign operations are recognised

in other comprehensive income. When a foreign

operation is disposed of, in part or in full, the relevant

amount in the foreign currency translation reserve is

transferred to profi t or loss.

1.14 Investment propertyInvestment property is property held either to earn

rental income or for capital appreciation, or both.

MeasurementInvestment property is measured initially at cost,

including transaction costs and directly attributable

expenditure in preparing the asset for its intended

use. Subsequently, all investment properties are

measured at fair value.

Valuation takes place annually, based on the

aggregate of the net annual rental receivable from

the properties, considering and analysing rentals

received on similar properties in the neighbourhood,

less associated costs (insurance, maintenance, repairs

and management fees). A capitalisation rate which

refl ects the specifi c risks inherent in the net cash fl ows

is applied to the net annual rentals to arrive at the

property valuations.

The fair value of undeveloped land held as investment

property is based on comparative market prices after

intensive market surveys.

Gains or losses arising from a change in fair value


income.

External, independent valuers having appropriate,

recognised professional qualifi cations and recent

experience in the location and category of the

property being valued and value the portfolio every

three years.


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1.15 Property, plant and equipmentMeasurementAll items of property, plant and equipment recognised

as assets are measured initially at cost. Cost includes

expenditures that are directly attributable to the

acquisition of the asset. The cost of self-constructed

assets includes the cost of material and direct labour

and any other cost directly attributable to bringing

the asset to a working condition for its intended use,

and the cost of dismantling and removing the items

and restoring the site on which they are located.

Except for the item land, buildings and aircraft, all

other items of property, plant and equipment are

subsequently measured at cost less accumulated

depreciation and any accumulated impairment losses.

Land, buildings and aircraft are subsequently

measured at fair value. Land and buildings are

revalued by external, independent valuers.

Valuers have appropriate recognised professional

qualifi cations and recent experience in the location

and category of the property being valued, and value

the portfolio every three years.

Any surplus in excess of the carrying amount is

transferred to a revaluation reserve net of deferred

tax. Surpluses on revaluation are recognised as

income to the extent that they reverse revaluation

decreases of the same assets recognised as expenses

in previous periods.

Defi cits on revaluation are charged directly

against the revaluation reserves only to the extent

that the decrease does not exceed the amount held

in the revaluation reserves in respect of that same

asset. Other defi cits are recognised in the statement

of comprehensive income.

Where parts of an item of property, plant and

equipment have signifi cantly diff erent useful

lives, they are accounted for as separate items of

property, plant and equipment. Although individual

components are accounted for separately, the

fi nancial statements continue to disclose a single

asset.

Subsequent costThe Group recognises the cost of replacing part of

such an item of property, plant and equipment in

carrying amount when that cost is incurred if it is

probable that the future economic benefi ts embodied

with the item will fl ow to the Group and the cost of

the item can be measured reliably. All other costs


income as an expense as they are incurred.

DepreciationDepreciation is recognised in the statement of

comprehensive income on a straight-line basis,

based on the estimated useful lives of the underlying

assets. Depreciation is calculated on the cost less

any impairment and expected residual value.

The estimated useful lives for the current and

comparative periods are as follows:

Item Average useful life

Land and buildings

Land Indefi nite

Building structure 50 years

Elevators 10 years

Aircraft 5 years

Heavy plant and machinery 10 – 20 years

Equipment 8 – 10 years

Other

Motor vehicles 1 – 5 years

Offi ce furniture and equipment 1 – 5 years

The residual values, useful lives and depreciation

method are re-assessed at each fi nancial year-end

and adjusted if appropriate.

Derecognition The carrying amount of items of property, plant and

equipment are derecognised on disposal or when no

future economic benefi ts are expected from their use

or disposal.

Gains or losses arising from derecognition are

determined as the diff erence between the net

disposal proceeds and the carrying amount of the

item of property, plant and equipment and included

in the statement of comprehensive income when

the items are derecognised. When revalued assets are

sold, the amounts included in the revaluation reserve

are transferred to retained earnings.



1.16 Biological assetsA biological asset is a living animal or plant.

MeasurementA biological asset is measured initially and at reporting

date at its fair value less estimated costs to sell. If the

fair value of a biological asset cannot be determined

reliably at the date of initial recognition, it is stated at

cost less any impairment losses.

1.17 LeasesFinance leasesLeases of assets under which the lessee assumes all

the risks and benefi ts of ownership are classifi ed as

fi nance leases.

Finance leases – Group as lesseeFinance leases are recognised as assets and liabilities

in the statement of fi nancial position at amounts

equal to the fair value of the leased property or,

if lower, the present value of the minimum lease

payments. The corresponding liability to the lessor is

included in the statement of fi nancial position as a

fi nance lease obligation.

The discount rate used in calculating the present

value of the minimum lease payments is the interest

rate implicit in the lease.

The lease payments are apportioned between the

fi nance charge and reduction of the outstanding

liability. The fi nance charge is allocated to each period

during the lease term so as to produce a constant

periodic rate on the remaining balance of the liability.

Finance leases – Group as lessorThe Group recognises fi nance lease receivables in the

statement of fi nancial position.

Finance income is recognised based on a pattern

refl ecting a constant periodic rate of return on the

Group’s net investment in the fi nance lease.

Operating leasesLeases of assets under which the lessor eff ectively

retains all the risks and benefi ts of ownership are

classifi ed as operating leases.

Operating leases – Group as lessorReceipts in respect of operating leases are accounted

for as income on the straight-line basis over the

period of the lease.

The assets subject to operating leases are presented

in the statement of fi nancial position according to

the nature of the assets.

Operating leases – Group as lesseeLease payments arising from operating leases are

recognised in the statement of comprehensive

income on a straight-line basis over the lease term.

Lease incentives received are recognised in the

statement of comprehensive income as an integral

part of the total lease expense.

Determining whether an arrangement contains a leaseAt inception of an arrangement, the Group

determines whether such an arrangement is or

contains a lease. A specifi c asset is the subject of a

lease if fulfi lment of the arrangement is dependent

on the use of that specifi ed asset. An arrangement

conveys the right to use the asset if the arrangement

conveys to the Group the right to control the use of

the underlying asset.

At inception or upon re-assessment of the

arrangement, the Group separates payments and

other consideration required by such an arrangement

into those for the lease and those for other elements

on the basis of their relative fair values. If the Group

concludes for a fi nance lease that it is impracticable to

separate the payments reliably, an asset and a liability

are recognised at an amount equal to the fair value

of the underlying asset. Subsequently the liability

is reduced as payments are made and an imputed

fi nance charge on the liability is recognised using

the Group’s incremental borrowing rate.

1.18 Cash and cash equivalentsFor the purpose of the cash fl ow statement, cash

and cash equivalents comprise cash on hand, deposits

held on call with banks, and investments in money

market instruments and bank overdrafts, all of which

are available for use by the Group unless otherwise

stated. Cash and cash equivalents are available within

three months.

Cash and cash equivalents are carried at amortised

cost in the statement of fi nancial position.


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1.19 InventoriesSpares and consumablesSpares and consumables are valued at the lower of

cost and net realisable value, on a weighted average

method.

The cost of inventories comprises all costs of purchase,

conversion and other costs incurred in bringing the

inventories to the present location and condition.

Obsolete, redundant and slow-moving items of spares

and consumable stores are identifi ed on a regular

basis and written down to their net realisable value.

Net realisable value is the estimated selling price

in the ordinary course of business, less the costs

of completion and selling expenses.

Raw materials and fi nished goodsRaw materials and fi nished goods consisting of

phosphate rock, phosphoric acid and other minerals,

are valued at the lower of either cost of production

and net realisable value.

Cost of production is calculated on a standard

cost basis, which approximates the actual cost and

includes the production overheads. Production

overheads are allocated on the basis of normal

capacity.

The valuation of inventory held by agents or in transit

includes forwarding costs, where applicable.

1.20 ProvisionsProvisions are recognised when:

• The Group has a present obligation as a result of a

past event

• It is probable that an outfl ow of resources

embodying economic benefi ts will be required to

settle the obligation

• A reliable estimate can be made of the obligation

The amount of a provision is the present value

of the expenditure expected to be required to settle

the obligation.

Where some or all of the expenditure required to settle

a provision is expected to be reimbursed by another

party, the reimbursement shall be recognised when,

and only when, it is virtually certain that reimbursement

will be received if the entity settles the obligation.

The reimbursement shall be treated as a separate

asset. The amount recognised for the reimbursement

shall not exceed the amount of the provision.

Provisions are not recognised for future operating

losses.

A constructive obligation to restructure arises only

when an entity:

• Has a detailed formal plan for the restructuring,

identifying at least:

° `The business or part of a business concerned

° The principal locations aff ected

° The location, function, and approximate

number of employees who will be

compensated for terminating their services

° The expenditures that will be undertaken

° When the plan will be implemented

• Has raised a valid expectation in those aff ected

that it will carry out the restructuring by starting

to implement that plan or announcing its main

features to those aff ected by it

After their initial recognition, contingent liabilities

identifi ed in business combinations that are separate

are subsequently measured at the higher of:

• The amount that would be recognised as a

provision

• The amount initially recognised less cumulative

amortisation

Contingent assets and contingent liabilities are not

recognised. Contingencies are disclosed in note 36.

Decommissioning provisionThe obligation to make good environmental or other

damage incurred in installing an asset is provided in full

immediately, as the damage arises from a past event.

If an obligation to restore the environment or

dismantle an asset arises on the initial recognition

of the asset, the cost is capitalised to the asset and

amortised over the useful life of the asset. The cost

of an item of property, plant and equipment includes

not only the ‘initial estimate’ of the costs relating to

dismantlement, removal or restoration of property,

plant and equipment at the time of installing the item

but also amounts recognised during the period of use,

for purposes other than producing inventory.

If an obligation to restore the environment or

dismantle an asset arises after the initial recognition

of the asset, then a provision is recognised at the time

that the obligation arises.

Onerous contractsA provision for onerous contracts is recognised when

the expected benefi ts to be derived by the Group



from a contract are lower than the unavoidable cost of

meeting its obligations under the contract. The provision

is measured at the present value of the lower of the

expected cost of terminating the contract and the

expected net cost of continuing with the contract.

Before a provision is established, the Group recognises

any impairment loss on the assets associated with the

contract.

1.21 Contingent liabilities and commitmentsContingent liabilitiesA contingent liability is a possible obligation that

arises from past events and whose existence will be

confi rmed only by the occurrence or non-occurrence

of one or more uncertain future events not wholly

within the control of the Group.

Contingent liabilities are not recognised in the

statement of fi nancial position of the Group but

disclosed in the notes.

CommitmentsItems are classifi ed as commitments where the Group

has committed itself to future transactions.

Commitments are not recognised in the statement

of fi nancial position of the Group but disclosed in the

notes.

1.22 TaxationDeferred taxDeferred income tax and deferred capital gains tax are

accounted for on the comprehensive basis, using the

liability method for all temporary diff erences arising

between the carrying amount of assets and liabilities

in the fi nancial statements and the corresponding

tax bases used in the computation of taxable income.

In principle, deferred tax is recognised for all taxable

temporary diff erences between the carrying amounts

of assets and liabilities for fi nancial reporting purposes

and the amounts used for taxation purposes. Deferred

tax assets are recognised to the extent that it is

probable that future taxable profi t will be available

against which unused tax deductions can be utilised.

Deferred tax assets are reviewed at each reporting

date and are reduced to the extent that it is no longer

probable that the related tax will be realised.

Deferred tax is not recognised if the temporary

diff erences arise from goodwill or from the initial

recognition (other than in a business combination)

of other assets and liabilities in a transaction that

aff ects neither taxable income nor accounting

income. Deferred tax is also not recognised in respect

of temporary diff erences relating to investments

in associates, subsidiaries and joint ventures to the

extent that it is probable that they will not reverse in

the foreseeable future and the timing of the reversal

of the temporary diff erence is controlled.

Deferred tax is measured at the tax rates that are

expected to be applied to temporary diff erences

when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting

date.

Deferred tax is charged or credited in the statement

of comprehensive income, except when it relates to

items credited or charged directly to equity, in which

case the deferred tax is also recognised in other


Income taxCurrent and deferred taxes are recognised as income

or an expense and included in profi t or loss for the

period, except to the extent that the tax arises from:

• A transaction or event which is recognised, in the

same or a diff erent period, to other comprehensive

income

• A business combination

Current tax and deferred taxes are charged or credited

to other comprehensive income if the tax relates to

items that are credited or charged, in the same or a

diff erent period, to other comprehensive income.

Current tax and deferred taxes are charged or credited

directly to equity if the tax relates to items that are

credited or charged, in the same or a diff erent period,

directly in equity.

Current tax also includes any adjustment to tax

payable in respect of previous years.

1.23 RevenueRevenue comprises net invoiced sales to customers,

dividends, interest, rentals and fee income, but

excludes value-added tax, and is measured at the

fair value of the consideration received or receivable,

net of returns and allowances, trade discounts and

volume rebates.


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Sales to customersRevenue from sale of goods is recognised in the

statement of comprehensive income when

the signifi cant risks and rewards of ownership

have been transferred to the customer, recovery

of the consideration is probable, associated costs

and possible return of goods can be estimated

reliably and there is no continuing managerial

involvement with the goods.

DividendsDividend income is recognised in the statement of

comprehensive income on the date the Group’s right

to receive payment is determined. Capitalisation

shares received are not recognised as income.

InterestInterest income is recognised in the statement of

comprehensive income using the eff ective interest

rate method. The eff ective interest rate is the rate that

exactly discounts the estimated future cash payments

and receipts through the expected life of the fi nancial

asset (or, where appropriate, a shorter period) to the

carrying amount of the fi nancial asset. The eff ective

interest rate is established on initial recognition of

the fi nancial asset and is not revised subsequently.

Fees• Income earned on the execution of a signifi cant

act is recognised when the signifi cant act has been

performed

• Income earned from the provision of services is

recognised as the service is rendered by reference

to the stage of completion of the service

• Income that forms an integral part of the eff ective

interest rate of a fi nancial instrument is recognised

as an adjustment to the eff ective interest rate and

recorded in interest income

RentalSee policy on leases.

1.24 Borrowing costsBorrowing costs are expensed in the period in

which they are incurred, except to the extent that

they are capitalised when directly attributable to

the acquisition, construction or production of a

qualifying asset.

1.25 Employee benefi tsPost-retirement medical benefi tsSome Group companies provide post-employment

healthcare benefi ts to its retirees. The entitlement to

post-employment healthcare benefi ts is based on the

employee remaining in service up to retirement age.

The expected costs of these benefi ts are accrued over

the period of employment, using the projected unit

of credit method. Valuations of these obligations are

carried out every third year by independent qualifi ed

actuaries.

Defi ned contribution plansThe majority of the Group’s employees are members

of defi ned contribution plans and contributions

to these plans are recognised in the statement of

comprehensive income in the year to which they

relate.

Defi ned benefi t plansA Group company operates a defi ned benefi t plan,

the assets of which are held in a separate trustee-

administered fund. The scheme is generally funded

through payments to the trustee-administered fund

as determined by the periodic actuarial valuations.

A defi ned benefi t plan is a pension plan that defi nes

an amount of pension benefi t to be provided, usually

as a function of one or more factors such as age, years

of service or compensation.

Where the calculation in respect of the defi ned

benefi t plan results in a benefi t to the Group, the

recognised asset is limited to the net total of any

unrecognised actuarial losses and past service costs

and the present value of any future refunds from the

plan or reductions in future contributions to the plan.

The liability in respect of defi ned benefi t pension

plans is the present value of the defi ned benefi t

obligation at the reporting date minus the fair

value of the plan assets, together with adjustments

for actuarial gains or losses and past service costs.

The defi ned benefi t obligation is calculated

annually by the independent actuaries using the

projected unit credit method. The present value

of the defi ned benefi t obligation is determined by

the estimated cash outfl ows, using interest rates of

government securities which have terms to maturity

approximating the terms of the related liability.



Actuarial gains and losses arising from experience

adjustments and the eff ects of changes in actuarial

assumptions to the defi ned benefi t plans are

recognised in income to the extent that cumulative

unrecognised actuarial gains and losses at the end

of the previous reporting period exceed the greater

of 10% of:

• The present value of gross defi ned benefi t obligation at that date

• The fair value of any plan assets at that date

Actuarial gains and losses arising from experience

adjustments, changes in actuarial assumptions

and amendments to pension plans are charged

or credited to income over the average remaining

service life of the related employees.

1.26 Segment reportingAn operating segment is a component of the Group

that engages in business activities from which it may

earn revenues and incur expenses, including revenue

and expenses that relate to transactions with any of

the Group’s other components, whose operating results

are reviewed regularly by the Executive Committee

to make decisions about resources allocated to each

segment and assess its performance, and for which

discreet fi nancial information is available.

1.27 Discontinued operations and non-current assets held-for-saleDiscontinued operationsA discontinued operation is a component of the

Group’s business that represents a separate major line

of business or geographical area of operations or is a

subsidiary acquired exclusively with a view to resale.

Classifi cation as a discontinued operation occurs upon

disposal or when the operation meets the criteria to

be classifi ed as held-for-sale, if earlier. A disposal group

that is to be abandoned may also qualify.

Non-current assets held-for-saleNon-current assets and disposal groups are classifi ed

as held-for-sale if their carrying amount will be

recovered through a sale transaction rather than

continuing use. This classifi cation is only met if the

sale is highly probable and the assets are available for

immediate sale.

MeasurementImmediately before classifi cation as held-for-sale,

the measurement of the assets (and all assets and

liabilities in a disposal group) is brought up-to-date

in accordance with the applicable IFRS. Then, on

initial classifi cation as held-for-sale, the non-current

assets and disposal groups are recognised at the

lower of carrying amount and fair value less costs to

sell. Any impairment loss on a disposal group is fi rst

allocated to goodwill and then to remaining assets

and liabilities on a pro rata basis, except that no loss is

allocated to inventories, fi nancial assets, deferred tax

assets, employee benefi t assets, investment property

and biological assets, which continue to be measured

in accordance with the Group’s accounting policies.

Impairment losses on initial classifi cation as held-for-

sale are included in profi t and loss even when there is

a revaluation. The same applies to gains and losses on

subsequent measurement.

Reclassifi cationThe non-current asset held-for-sale will be reclassifi ed

immediately when there is a change in intention to

sell. At that date, it will be measured at the lower of: its

net book value before the asset was classifi ed as held-

for-sale, adjusted for any depreciation, amortisation

or revaluations that would have been recognised had

the asset not been classifi ed as held-for-sale; and its

recoverable amount at the date of the subsequent

decision not to sell.

1.28 Related partiesThe IDC operates in an economic environment

together with other entities, directly or indirectly,

owned by the South African Government. As a result

of the constitutional independence of all three

spheres of government in South Africa, only parties

within the national sphere of government will be

considered to be related parties.

Key management is defi ned as individuals with

the authority and responsibility for planning,

directing and controlling the activities of the entity.

All individuals from the level of executive management

up to the Board of directors are regarded as key

management per the defi nition of the standard.

Close family members of key management personnel

are considered to be those family members who may

be expected to infl uence, or be infl uenced by key

management individuals in their dealings with the

entity.

Other related party transactions are also disclosed in

terms of the requirements of IAS 24.


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1.29 Share-based paymentsA Group company operates an equity-settled share-

based plan and a cash-settled share-based plan.

The equity-settled share-based payments vest

immediately, the reserve was recognised in equity

at grant date.

The cash-settled plan was entered into with one

of the Group company’s employees, under which

the company receives services from employees by

incurring the liability to transfer cash to the employees

for amounts that are based on the value of the

company’s shares. The fair value of the transaction is

measured using an option pricing model, taking into

account all terms and conditions. The fair value of

the services received in exchange for the grant of the

options is recognised as an expense. The total amount

to be expensed is determined by reference to the fair

value of the options granted:

• Including any market performance conditions

• Excluding the impact of any service and non-

market performance vesting conditions

• Including the impact of any non-vesting

conditions

The services received by the company are recognised

as they are received and the liability is measured at

fair value. The fair value of the liability is re-measured

at each reporting date and at the date of settlement.

Any changes in the fair value are recognised in profi t

or loss for the period.

1.30 Determination of fair valuesA number of the Group’s accounting policies and

disclosures require the determination of fair value, for

both fi nancial and non-fi nancial assets and liabilities.

Fair values have been determined for measurement

and/or disclosure purposes based on the following

methods. When applicable, further information about

the assumptions made in determining fair values is

disclosed in the notes specifi c to that asset or liability.

Property, plant and equipmentThe market value of land and buildings is the

estimated amount for which a property could be

exchanged on the date of valuation between a

willing buyer and a willing seller in an arm’s length

transaction after proper marketing wherein the parties

had each acted knowledgeably and willingly.

Intangible assetsThe fair value of other intangible assets is based on

the discounted cash fl ows expected to be derived

from the use and eventual sale of the assets.

Investment propertyValuation methods and assumptions used in

determining the fair value of investment property.

• Capitalisation methodThe value of the property refl ects the present value

of the sum of the future benefi ts which an owner

may expect to derive from the property. These

benefi ts are expressed in monetary terms and are

based upon the estimated rentals such a property

would fetch, i.e. the market-related rental between

a willing landlord and tenant. The usual property

outgoings are deducted to achieve a net rental,

which is then capitalised at a rate an investor would

require receiving the income

• Comparative methodThe method involves the identifi cation of

comparable properties sold in the area or in a

comparable location within a reasonable time.

The selected comparable properties are analysed

and compared with the subject property.

Adjustments are then made to their values to

refl ect any diff erences that may exist. This method

is based on the assumption that a purchaser will

pay an amount equal to what others have paid or

are willing to pay

• Residual land valuation methodThis method determines the residual value which is

the result of the present value of expected infl ows

less all outfl ows (including income tax) less the

developer’s required profi ts. This is the maximum

that the developer can aff ord to pay for the real

estate. This residual value is in theory also the

market value of the land

Non-derivative fi nancial liabilitiesFair value, which is determined for disclosure purposes,

is calculated based on the present value of future

principal and interest cash fl ows, discounted at the

market rate of interest at the reporting date. In respect

of the liability component of convertible notes, the

market rate of interest is determined by reference

to similar liabilities that do not have a conversion

option. For fi nance leases the market rate of interest is

determined by reference to similar lease agreements.



Share-based payment transactionsA Group company entered into a Business Assistance

Agreement, which is considered to be an equity-

settled, share-based payment transaction. The fair

value of the technical and business services received

in exchange for the grant of equity instruments is

recognised as an expense. The total amount to be

expensed over the vesting period is determined by

reference to the fair value of the equity instruments

granted, excluding the impact of any non-market

vesting conditions. Non-market vesting conditions are

included in assumptions about the number of equity

instruments that are expected to vest.

1.31 Critical accounting policies and judgementsEstimates and judgements are continually evaluated

and are based on historical experience and other

factors, including expectations of future events

that are believed to be reasonable under the

circumstances.

The Group makes estimates and assumptions

concerning the future. The resulting accounting

estimates will, by defi nition, rarely equal the related

actual results. The estimates and assumptions that

have a signifi cant risk of causing a material adjustment

to the carrying amounts of assets and liabilities within

the next fi nancial year are outlined below:

Income taxesSignifi cant judgement is required in determining

the world-wide provision for income taxes. There

are many transactions and calculations for which

the ultimate tax determination is uncertain

during the ordinary course of business. The Group

recognises liabilities for anticipated tax audit issues

based on estimates of whether additional taxes will

be due. Where the fi nal tax outcome of these matters

is diff erent from the amounts that were initially

recorded, such diff erences will impact the income

tax and deferred tax provisions in the period in

which such determination is made.

Fair value of fi nancial instrumentsThe fair value of fi nancial instruments that are not

traded in an active market is determined by using

valuation techniques. The Group uses its judgement

to make assumptions that are mainly based on market

conditions existing at each reporting date.

Unlisted equities are valued based on various

valuation methods, including free cash fl ow,

price : earnings (PE) and net asset value (NAV) bases.

Judgement and assumptions in the valuations and

impairments include:

• Free cash fl ows of investees

• Replacement values

• Determining the discount or premium applied to the IDC’s stake in investees

• Sector/sub-sector betas

• Debt weighting – this is the target interest-bearing debt level

• Determining the realisable value of assets

• Probabilities of failure in using the NAV model

Post-employment obligationsSignifi cant judgement and actuarial assumptions

are required to determine the fair value of the

post-employment obligations. More detail on these

actuarial assumptions is provided in note 37 to the

fi nancial statements.

Environmental rehabilitation liabilityIn determining the environmental rehabilitation

liability, an infl ation rate of 6.00% (FY2011: 6.31%) was

assumed to increase the rehabilitation liability for the

next 20 years, and a rate of 8.37% (FY2011: 8.97%) to

discount that amount to present value. The discount

rate assumed of 8.37% is a risk-free rate, specifi cally

the rate at which the R186 South African government

bond was quoted at year-end.

Fair value of share-based paymentsThe fair value of equity instruments on grant date is

determined based on a simulated company value,

using the Geometric Brownian Motion model.

The valuation technique applied to determine the

simulated company value is part of the Monte Carlo

simulation methodology.

Impairment of assetsThe Group follows the guidance of IAS 36: Impairment

of Assets, to determine when an asset is impaired.

This determination requires signifi cant judgement.

In making this judgement, the Group evaluates the

impairment indicators that could exist at year-end,

such as signifi cant decreases in the selling prices of

fi nished goods, signifi cant decreases in sales volumes

and changes in the international export regulatory

environment.


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2. Financial assets and liabilities The table below sets out the Group’s classifi cation of each class of fi nancial assets and liabilities, and their fair values:

Figures in Rand million Notes

Held for trading

Loans and recei-

vables Available-

for-sale

Other amortised

cost Total Fair value

Group – 2012AssetsCash and cash equivalents 4 – 7 825 – – 7 825 7 825 Loans and advances to clients 6 – 15 978 – – 15 978 15 978 Investments – listed equities 7 – – 54 381 – 54 381 54 381 Investments – unlisted equities 7 – – 6 308 – 6 308 6 308 Investments – preference shares 7 1 205 – 7 770 – 8 975 8 975 Derivative assets 18 7 – – – 7 7Trade and other receivables 5 – 1 010 – – 1 010 1 010 LiabilitiesLoans 20 – – – 9 923 9 923 9 778 Derivative liabilities 18 5 – – – 5 5Bank overdrafts 4 – – – 3 3 – Trade and other payables 19 – – – 1 927 1 927 1 927

Group – 2011

AssetsCash and cash equivalents 4 – 5 828 – – 5 828 5 828

Loans and advances to clients 6 – 12 053 – – 12 053 12 053

Investments – listed equities 7 – – 56 664 – 56 664 56 664

Investments – unlisted equities 7 – – 5 007 – 5 007 5 007

Investments – preference shares 7 999 – 7 896 – 8 895 8 895

Derivative assets 18 10 – – – 10 10

Trade and other receivables 5 – 721 – – 721 721

LiabilitiesLoans 20 – – – 6 677 6 677 6 583

Derivative liabilities 18 11 – – – 11 11

Bank overdrafts 19 – – – 14 14 14Trade and other payables 19 – – – 1 152 1 152 1 152



Figures in Rand million Notes

Held for trading

Loans and recei -

vables Available-

for-sale

Other amortised

cost Total Fair value

Company – 2012

AssetsCash and cash equivalents 4 – 7 117 – – 7 117 7 117 Loans and advances to clients 6 – 15 070 – – 15 070 15 070 Investments – listed equities 7 – – 34 647 – 34 647 34 647 Investments – unlisted equities 7 – – 6 102 – 6 102 6 102 Investments – preference shares 7 1 205 – 7 770 – 8 975 8 975 Derivative assets 18 6 – – – 6 6 Trade and other receivables 5 – 275 – – 275 275 LiabilitiesLoans 20 – – – 17 814 17 814 17 669 Derivative liabilities 18 3 – – – 3 3 Trade and other payables 4 – – – 551 551 551

Company – 2011

AssetsCash and cash equivalents 4 – 5 237 – – 5 237 5 237

Loans and advances to clients 6 – 9 294 – – 9 294 9 294

Investments – listed equities 7 – – 35 811 – 35 811 35 811

Investments – unlisted equities 7 – – 4 765 – 4 765 4 765

Investments – preference shares 7 999 – 7 896 – 8 895 8 895

Derivative assets 18 4 – – – 4 4

Trade and other receivables 5 – 224 – – 224 224

LiabilitiesLoans 20 – – – 13 895 13 895 13 801

Derivative liabilities 18 8 – – – 8 8 Trade and other payables 19 – – – 433 433 433


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3. Financial risk management Introduction and overviewA fundamental shift in the perception of risk management has

taken place globally over the past few years. It has moved from

a back offi ce reporting/control/cost centre into a strategic

competitive weapon. Modern risk management is now

perceived as playing a key role in the major strategic decisions

of an organisation.

RISK MANAGEMENT APPROACH

Enterprise Risk ManagementIn line with sectoral best practice, the IDC has instituted a

robust Enterprise Risk Management (ERM) process, founded on

a framework that is shareholder-value based, organisationally

embedded, supported and assured, and reviewed on a

continuous basis. ERM is the application of risk management

throughout the Corporation rather than only in selected

business areas or disciplines. Accordingly, risk management

at the IDC is both decentralised and centralised, with every

staff member of the Corporation being responsible for risk

management.

ERM is designed to assist the IDC with the identifi cation,

quantifi cation and prioritisation of material risks that have

the ability to impact the business. ERM recognises that

risks (including opportunities) are dynamic, often highly

interdependent and ought not to be considered and

managed in isolation. ERM responds to this challenge by

providing a methodology for managing Corporation-wide

risks in a comprehensive and integrated way. The objective

of ERM is to ensure that these components provide a

continuous, reiterative process of risk identifi cation, validation,

management and review. The ERM process focuses on the

main strategic risks to which the IDC is exposed.

When properly executed, risk management provides

reasonable, but not absolute assurance, that the institution

will be successful in achieving its goals and objectives. Risks

manifest as negative impacts on goals and objectives or as

missed opportunities to enhance institutional performance.

IDC’s stakeholders expect its decision-makers to anticipate

and manage risks in order to eliminate waste and ineffi ciency,

reduce shocks and crises and to continuously improve

capacity for delivering on their institutionalised mandates.

IDC’s business model strives to maximise fi nancial and

developmental returns while maintaining an acceptable risk

profi le.

The IDC’s Risk Management FrameworkThe objectives of the IDC’s Risk Management Framework

include ensuring the application of best practice, achieving

compliance with legislative requirements and ensuring that

these activities are more than a compliance exercise but rather a

value-addition tool to assist the Corporation in the achievement

of its strategic objectives. These objectives are achieved through

adoption of legislative requirements, benchmarking on best

practice and resource allocation and utilisation of the outcomes

in decision-making by all levels in the Corporation.

The Risk Management Framework lays out guiding principles

for the IDC’s management of risk on an ERM basis. This

framework is not one discrete policy, strategy or document.

Rather, it comprises the totality of all the structures, policies,

strategies and procedures within the IDC that deal with risk

management at the strategic or ERM level. The components of

the Risk Management Framework are discussed below:

A. Annual Risk AssessmentIn compliance with the conditions of the Public Finance

Management Act (Act No. 1 of 1999) (PFMA), and in line

with the recommendations of the King Code of Governance

principles (King III) and the Public Sector Risk Management

Framework, an assessment of risk faced by the IDC is

undertaken annually. This process strives to achieve the

identifi cation of the critical risks the Corporation may face

to enable the Corporation to formulate appropriate risk

strategies and action plans to mitigate and address these

risks, where necessary. The process followed in the IDC’s risk

assessment incorporates seven steps as presented below:

• Strategy: The risk assessment process of the

Corporation follows a top down approach as

recommended by King III and other best practice

standards. That is, the risk assessment is based

on those risks which arise from the Corporation’s

strategic objectives and those risks which could

prevent the Corporation from achieving its strategic

objectives

• Risk Identifi cation: The risks that the Corporation may

be exposed to are determined based on the following:

° Review of prior years risk assessments

° Review of Internal Audit Department fi ndings for

the previous two years

° Review of the External Auditor’s Management

Letter for the previous two years

° Inputs from IDC’s Executive Management,

Strategic Business Unit and Departmental Heads

and other senior staff



° Analysis of benchmarked risk standards (mainly

King III, Basel II) and other organisations’ ERM

activities

• Risk Assessment: The risks identifi ed are assessed

based on the probable impact following an

occurrence and the likelihood of the occurrence

happening in order to determine a risk ranking.

Risks are assessed on a residual risk basis; that

is, the possible impact and likelihood take into

consideration the Corporation’s existing controls

• Risk Mitigation: Controls for each of the risks are

identifi ed through business-focused workshops with

Strategic Business Unit and Departmental Heads

and other senior role players

• Execution and Monitoring: The results of the risk

assessment, including key controls under review

are presented to IDC’s Executive Management and

the IDC Board Risk and Sustainability Committee.

Thereafter, a summary of key matters is presented

to the IDC Board. This process enables IDC’s Executive

Management and Board to highlight areas where

additional focus is required

• Assurance: Assurance that the risks identifi ed and

the associated controls are appropriate and eff ective

is the responsibility of the assurance providers, as

identifi ed in the assessment. Internal Audit, as the

Corporation’s main assurance provider, utilises this

risk assessment in the formulation of its Internal Audit

Programme

• Monitoring and Reporting: Risks are continuously

monitored and reported on to ensure that the

risk assessment exercise does not become a tick-

box exercise. The risk assessment process results in

the formation of a Risk Universe and Risk Register for

the Corporation which details the material strategic or

macro risks to which it is exposed

B. Risk Appetite and Risk Tolerance ProcessOne of the key practices of risk management is the

determination and quantifi cation of an organisation’s

risk appetite based on what is of strategic importance.

IDC continuously makes improvements to the process

to ensure that it is applicable to the Corporation and its

strategic intent.

The setting of an eff ective risk appetite is considered one

of the key building blocks to establishing a sound risk

management framework. Risk appetite is defi ned as the

amount and type of risk that an organisation is willing

to pursue or retain. The determination of the IDC’s risk

appetite plays an important role in its ERM activities. It is

also considered by the IDC to be a leading best practice

methodology to assist it to achieve its strategic objectives

while maintaining a sound platform for future viability

and continued growth.

Defi ning the level of risk the IDC is comfortable with

assists it to: make better informed business decisions;

focus on those risks that exceed the defi ned appetite for

risk; develop a business culture with a high awareness

of risk; and strike a balance between daring and prudence.

The IDC’s risk appetite is linked and aligned to its

mandate and business objectives and is an agreement

between its business goals and the related risks.

Risk tolerance is considered an integral part of the

process and is an organisation’s readiness to bear

the risk after risk mitigation, in the pursuit of its

strategic objectives.

The setting of risk appetite and tolerance levels aids

operational decision-making and strategic planning and

provides management with the information to determine

whether the risk profi les of current and potential activities

are either fi nancially acceptable or require additional

risk management measures to reduce the volatility to

within risk appetite limits. Hence, it helps management

to allocate resources and management time to the most

signifi cant risks. The use of risk appetite also ensures that

management does not make conservative decisions

that expose the Corporation to insuffi cient risk and

hence generate inadequate returns on capital.

The IDC’s Risk Appetite and Tolerance Process incorporate

the fi ve steps set out below:

1. Establish Key Risk Indicator (KRI) per risk:

For each of the risks identifi ed in step 2 of the risk

assessment process, one or more KRI is established.

The KRI can be fi nancial and non-fi nancial, qualitative

or quantitative. A KRI is related to a specifi c risk and

is an indicator that provides an eff ective monitoring

tool to measure changes in risk levels and keep

management appraised of shifts in established

patterns. Measurement of the KRI is used to answer

the question: “How is our risk profi le changing and is

it within our desired tolerance levels?”


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2. Establish the risk appetite thresholds per KRI:

The IDC has determined its risk appetite thresholds

based on its strategic objectives, corporate values,

organisational and control dimensions. Risk appetite,

at the IDC, is defi ned as the amount of risk exposure,

or potential adverse impact from an event that the

IDC is willing to accept/retain. For each risk, the

IDC risk appetite thresholds are determined on three

simple levels: appetite for the risk, tolerate the risk,

or avoid the risk. Once a risk threshold has been

breached or KRI indicates that breach is eminent, risk

management treatments and business controls are

considered/implemented to bring the exposure level

back to within an acceptable range.

3. Review the results with the risk owners:

Once KRI and risk appetite/tolerance levels have

been set per risk, a review of the combined results is

undertaken with each of the risk owners. The actual

result for each of the risks is calculated and compared

to the risk appetite thresholds. During this process each

individual risk is assessed.

4. Compare risk measurement outcomes with results from the annual risk assessment:

The next step is to assess how the risk appetite

outcomes compare to the risk profi le established

through the annual risk assessment. This assessment

is achieved through a gap analysis and focuses on

what is considered to be the most important risks.

5. Summarise key findings:

An analysis and comparison of the risk appetite

thresholds with the actual results are undertaken to

identify the key risks facing the IDC.

C. Risk Management PlanRisk management, like any business activity should be

continuously improved. This means that the Corporation

will always strive to move from its current level of

risk maturity to a more mature level of risk. This maturity

can include: improvements in risk governance, risk

identifi cation, risk assessment, risk monitoring, and

risk optimisation.

Risk Management Plan detailing proposed activities and

improvements to IDC’s ERM activities is prepared on an

annual basis.

D. Risk Management Policy StatementThe Risk Management Policy Statement communicates

the Corporation’s stance with regard to risk management.

It is a brief statement about the Corporation’s

commitment to risk management and is informed by,

inter alia, the Corporation’s risk profi le, appetite for loss,

loss tolerance levels and sustainability management.

Risk Management DepartmentThe Risk Management Department (RMD) of the

IDC proactively promotes risk awareness, while monitoring

and overseeing the management of key risks facing the

Corporation on the basis of the ERM Framework. RMD is

an independent cost centre established in line with best

practise. RMD provides credit, operational and enterprise

risk management analysis/products/services to its various

stakeholders including: IDC’s Board and Board Risk and

Sustainability and other Board Committees, Executive

Management, IDC’s external and internal Auditors, Strategic

Business Units (SBU’s), Departments and other stakeholders.

RMD’s primary objectives are:

• To support the receipt of appropriate fi nancial and

development returns while maintaining an acceptable

risk profi le

• To support the application of best practice principles

in order to analyse and manage risks, so as to ensure

the strongest protection for the Corporation’s assets, its

fi nancial results, and consequently its capital

• Promoting a culture of increased risk awareness

throughout the Corporation utilising/applying ERM

activities and techniques

• To establish, review and implement various risk

management policies, systems, and/or frameworks

The IDC endeavours to maintain credit risk exposure within

acceptable parameters, managing the credit risk inherent in

the entire portfolio as well as the risk associated with individual

business partners or transactions. The eff ective management

of credit risk is a critical component of a comprehensive

approach to risk management and is essential to the long-

term success of the Corporation. This is the dominant risk

within the IDC as the provision of loans, advances,

quasi-equity, equity investments, and guarantees represent

the Corporation’s core business.



Major Risk Categories Identifi ed at IDC:

Strategic riskThis category refers to the risk of an organisation’s value

collapsing, stagnating or migrating as a result of a failure to

adapt to changing industry profi t patterns. Key risks include

macro-economic risk, which has increased signifi cantly

over the past few years due to, inter alia, geographical

developments, lower economic growth for both advanced and

emerging economies, changes in access to fi nancial capital

and changing customer priorities. In response to the global

economic crisis, the IDC considers intervening in businesses

that are experiencing diffi culties. In line with its mandate, each

application is considered on its own merit and no blanket

bailouts at broad industry level are accorded. Specifi c criteria

and considerations have to be met before funding is approved.

Other risks included in this category are reputational risk,

knowledge management risk, people risk, developmental

risk and stakeholder management risk, i.e. failing to meet the

Corporations’ mandate.

The IDC Board have the responsibility for defi ning the strategic

direction of the IDC and ensuring that it is managed in a

manner consistent with strategy. The challenge is for the

global strategic and risk perspectives to be communicated to

and understood by staff at all levels of the Corporation such

that, combined, there is suffi cient information to refl ect the

overall attitude to risk and to determine whether or not risks

should be accepted, mitigated or avoided. This challenge can

be addressed through the defi nition and measurement of the

Corporation’s risk appetite mentioned above.

Financial riskThis risk category encompasses losses that may occur as a

result of the way the IDC is fi nanced and its own fi nancing

or investment activities. Financial risk includes market risk

related to volatility in interest rates, exchange rates, commodity

and equity prices, liquidity/funding risk related to the cost of

maintaining various fi nancial positions and fi nancial compliance

risk, as well as credit and settlement risk related to the potential

for counterparty default. Other fi nancial risks faced by the

Corporation include: the risk of over-concentrating investments

in certain economic sectors, regions or counterparties as

well as the risk of over-dependency on a limited number of

investments and/or types of products and the risk of margin

erosion due to inappropriate pricing relative to the cost of

funding of capital. The management of these risk areas is

therefore critical for the IDC.

FINANCIAL: CREDIT RISKThis refers to the risk that a counterparty to a fi nancial

transaction will fail to meet its obligations in accordance

with the agreed terms and conditions of the contract, either

because of bankruptcy or for any other reason, thereby

causing the asset holder to suff er a fi nancial loss. Credit risk,

as defi ned by the IDC, comprises the potential loss on loans,

advances, guarantees, quasi-equity and equity investments

due to counterparty default.

Credit risk arises as a result of the Corporation’s lending

activities as well as the placement of deposits with fi nancial

institutions.

Approach to Managing Credit Risk

The IDC endeavours to maintain credit risk exposure within

acceptable parameters, managing the credit risk inherent in

the entire portfolio as well as the risk associated with individual

clients or transactions. The eff ective management of credit

risk is a critical component of a comprehensive approach

to risk management and is essential to the long-term success

of the Corporation. This is the dominant risk within the IDC as the

providing of loans, advances, quasi-equity, equity investments

and guarantees represent the Corporation’s core business.

Managing Credit Risk Concentration

The IDC can be exposed to various forms of credit risk concentration which, if not properly managed, may cause signifi cant losses that could threaten its fi nancial health. Accordingly the IDC considers the management (including measurement and control) of its credit concentrations to be of vital importance. There is recognition in Basel II that portfolios of fi nancial institutions can exhibit credit concentrations and that prudently managing such concentrations is one of the important aspects in eff ective credit risk management. However, despite the recognition of credit concentrations as important sources of risk for portfolios, there is no generally accepted approach or methodology for dealing with the issue (including measurement) of concentration, particularly with respect to sector or industry concentration.

Concentrations within a lending and/or investment portfolio can be viewed in a variety of ways: by borrower, product type, collateral type, geography and any variable that may be associated with a group of credits. Investment or credit concentrations are considered to be a large group of exposures that respond similarly to the same stresses. These stresses can be:

• Sensitivity to a certain industry or economic factors

• Sensitivity to geographical factors, either a single country or region of interlinked ones

• Sensitivity to the performance of a single company or counterparty

• Sensitivity to a particular risk mitigation technique, e.g.

a particular collateral type


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The IDC has various established methodologies for the

management of the credit concentrations to which it is

exposed and has established risk concentration limits and

policies for:

• Individual and groups of counterparties

• Geographical locations

• Economic sectors

The concentration limits are reviewed on an annual basis or

sooner should the need arise. The status of the IDC investment

book is reported to IDC Executive Management, the Board Risk

and Sustainability Committee and the IDC Board on a regular

basis.

Counterparty limits

The need for a counterparty limit is to identify and protect the

IDC’s balance sheet and income statement from signifi cant

losses/volatility which threaten fi nancial sustainability,

should a counterparty default or experience material loss

in value. A counterparty could be any one client or a client

which has one or more similarities with another client to

which IDC has or had a credit exposure, e.g. shareholding (by

legal or natural person) of 51% or more; management control;

revenue or expenses reliance of 51% or more; and/or provides

security for 51% or more of IDC’s exposure.

The Basel II principles for the management of credit risk

indicate, in particular, that an important element of credit risk

management is the establishment of exposure limits on single

counterparties and groups of connected counterparties.

In determining the recommended counterparty limit for the

IDC, its strategic objectives are taken into account.

Sector limits

Concentration risk in the context of sectors generally comes

into being through an uneven distribution of an institution’s

exposure to business sectors which can generate losses large

enough to jeopardise its solvency or profi tability. In particular,

sector concentration arises because business conditions

and hence default risk may be linked across and within

business sectors within the economy. Concentrations of credit

exposures in sectors can pose risks to the earnings and capital

of any fi nancial institution in the form of unexpected losses.

One of the risk management techniques of managing sector

risk concentrations entails the establishment of investment

limits, the monitoring and analysis thereof. The monitoring

and limiting of the concentration of exposures in certain

sectors is necessary to reduce the risk of an exposure to a

signifi cant downturn in a particular industry in time, and thus

to be able to avoid losses, as far as possible, by implementing

counter-measures (e.g. withdrawing from or reducing certain

exposures). Experience has shown that the earlier risks are

identifi ed, the more eff ectively they can be countered.

Although the IDC’s business cuts across a number of sectors,

it could be exposed to concentration risk by virtue of

disproportionately large exposures in any of these sectors.

Managing and monitoring such concentrations to limit

downside potential is therefore an integral part of an eff ective

risk management programme. To avoid undue losses due

to associated exposures, the IDC strives to identify potential

common risk factors and minimise its aggregate exposure

to these risk factors. By spreading its risk over many sectors

instead of few, the IDC can minimise the collective impact of

economic events or trends on its earnings and capital. Sector

diversifi cation should, by reducing dependence on specifi c

sectors, assist in obtaining assets whose performance is not

aff ected by the same external factors. The goal of sector limits is

for the IDC to attempt to diversify or at least identify its portfolio

concentrations based on exposures to sectors and identify

concentrations of exposures that could become closely related,

especially during a crisis; this provides an important mechanism

to protect the long-term fi nancial soundness of the IDC.

The key challenge to establish a sector limit methodology

is to ensure that it is eff ective in protecting the institution

from credit events and be practical in its enforcement.

The establishment of sector limits is aligned with the overall

strategy of the IDC (including its risk appetite).

Geographical/regional limits

The IDC’s vision is to be the primary driving force of

commercially sustainable industrial development and

innovation to the benefi t of South Africa and the rest of

the continent. The IDC has realised that, for the South African

economy to grow at a pace that is conducive to creating

suffi cient jobs for South Africans, the economies in the

rest of Africa must also grow and prosper. This is achieved

by promoting entrepreneurship through the building of

competitive enterprises based on sound business principles.

To this end, regional limits and country boundaries relating to

IDC’s investment activities outside South Africa are in place.

The IDC Act views Africa in terms of South Africa, southern

Africa and the rest of Africa. This distinction is evident of the

importance that the South African Government places on

Southern Africa relative to the rest of the continent. As such,

the Corporation’s activities are weighted in favour of southern

Africa in terms of budget allocation and resultant exposure.

Should approval of a transaction result in breach of this

limit explicit approval is required from the Board Investment

Committee.



Sectoral analysis

Group Company Loans and

advances to clients

Investment securities

Loans and advances to

clients Investment securities

Figures in Rand million 2012 2011 2012 2011 2012 2011 2012 2011

Carrying amount as per Notes 6 and 7 15 978 12 053 69 664 70 566 15 070 9 294 49 724 49 471

Concentration by sector as per Standard Industrial Classifications (SIC): Agriculture, forestry and fi shing 792 477 216 236 705 376 216 236Basic chemicals 20 75 368 313 17 52 368 313Basic iron and steel 50 38 2 733 4 205 49 29 2 733 4 205 Basic non-ferrous metals 108 – 7 909 9 142 107 – 7 909 9 142 Beverages 22 26 – 6 22 18 – 6Building construction 446 691 249 205 439 541 249 205Business services 55 60 85 148 44 43 85 148Catering and accommodation services 1 671 2 027 15 24 1 605 1 575 15 24Coal mining 186 6 6 212 5 724 183 5 6 212 5 724 Communication 2 004 1 907 43 92 1 865 1 454 43 92Electrical machinery 89 77 – – 88 61 – – Electricity, gas and steam 761 937 18 13 743 751 18 13Finance and insurance 589 493 546 878 580 395 546 878Food 973 385 143 77 958 303 143 77Footwear 8 6 – – 8 5 – – Furniture 31 22 – – 31 17 – – Glass and glass products 103 4 – – 101 3 – – Gold and uranium ore mining 405 473 517 493 363 379 517 493Government 44 – 13 – 43 – 13 – Machinery and equipment 398 237 14 16 389 189 14 16Medical, dental and other health and veterinary services 495 307 1 371 887 487 227 1 371 887Metal products excluding machinery 475 329 23 19 467 260 23 19Motor vehicles, parts and accessories 1 805 626 100 13 1 755 501 100 13Non-metallic minerals 148 61 10 7 146 39 10 7Other community, social and personal services 519 416 1 132 986 511 307 1 132 986Other chemicals and man-made fi bres 603 282 21 582 22 544 568 221 1 642 1 449 Other industries 88 77 – – 86 33 – – Other mining 1 443 713 25 650 23 660 1 097 534 25 650 23 660 Other services 8 25 – 10 8 20 – 10Other transport equipment 61 87 11 2 60 62 11 2Paper and paper products 62 84 132 117 61 67 132 117Plastic products 140 57 77 84 137 45 77 84Printing, publishing and recorded media 31 49 – 3 31 36 – 3Professional and scientifi c equipment 56 47 1 – 48 38 1 – Rubber products 5 – – – 5 – – – Television, radio and communication equipment 47 23 3 2 46 16 3 2Textiles 368 234 – – 361 176 – – Transport and storage 284 61 13 48 279 41 13 48Water supply 208 213 4 3 205 170 4 3Wearing apparel 132 133 – – 130 99 – – Wholesale and retail trade 147 201 26 49 145 158 26 49Wood and wood products 98 87 448 560 97 48 448 560

15 978 12 053 69 664 70 566 15 070 9 294 49 724 49 471


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Geographical analysis

Group Company







Concentration by location:

South Africa 11 584 8 304 68 376 68 064 10 780 6 350 48 436 46 969

SADC 2 709 2 351 527 1 469 2 631 1 856 527 1 469

Rest of Africa 1 324 1 158 – – 1 303 899 – –

Outside Africa 361 240 761 1 033 356 189 761 1 033

15 978 12 053 69 664 70 566 15 070 9 294 49 724 49 471

Internal rating model and pricingThe IDC is progressing well in developing internal credit

rating and probability of default calculation methodologies.

To date, Internal Rating Templates (IRTs) have been developed

and implemented for Small and Medium Enterprises (SMEs),

Middle Market clients and Projects. The SME and Middle

Market methodologies are principally based on Moody’s KMV

products, including RiskAnalyst, RiskCalc South Africa, together

with the IRTs whilst the Project IRTs were developed internally.

The probabilities of default produced by the SME and Middle

Market models are one of the tools utilised in determining the

credit risk and appropriate pricing structure for these facilities.

The key objectives of internal rating methodologies and

related rating models are:

• To assess the overall credit or investment risk on a

quantitative and objective basis

• To objectively determine the credit quality of individual

clients as well as the portfolio

• To aid in portfolio analysis

• To allow migration analysis of individual clients as well as

the portfolio

• To assist in identifying which clients are due for review



Credit risk exposure

Group Company







Individually impaired

Low risk 1 249 1 388 1 365 1 065 764 1 387 1 365 1 065

Medium risk 2 406 1 031 476 739 2 273 1 031 476 739

High risk 1 209 669 368 209 1 200 669 368 209

Gross amount 4 864 3 088 2 209 2 013 4 237 3 087 2 209 2 013

Allowance for impairment (2 307) (1 663) (1 227) (1 199) (2 307) (1 663) (1 227) (1 199)

Carrying amount 2 557 1 425 982 814 1 930 1 424 982 814

Past due but not impaired

Low risk 68 23 68 22

Medium risk 318 205 316 205

High risk 81 43 81 43

Carrying amount 467 271 465 270

Past due comprises:

0 – 30 days 89 39 89 38

31 – 60 days 55 29 54 29

61 – 90 days 18 13 18 13

91 – 120 days 16 7 16 7

120 days + 289 183 288 183

Carrying amount 467 271 465 270

Neither past due nor impaired

Low risk 7 755 4 376 55 204 53 297 7 488 3 255 35 263 32 202

Medium risk 5 244 5 646 13 478 16 215 5 243 4 148 13 479 16 215

High risk 177 520 – 240 166 382 – 240

Carrying amount 13 176 10 542 68 682 69 752 12 897 7 785 48 742 48 657

Portfolio impairment (222) (185) – – (222) (185) – –

Total carrying amount 15 978 12 053 69 664 70 566 15 070 9 294 49 724 49 471

Carrying value of renegotiated loans 1 337 1 240 – – 1 335 1 226 – –

The IDC loan book is reviewed on a regular basis, by

IMC Loans, which monitors and manages the quality and

arrears on a proactive basis. Clients are classifi ed according to

their risk profi les based on the most recent available fi nancial

information and repayment profi le. A low risk client is a client

that is not in arrears and for which no impairment triggers

have been identifi ed. A medium risk client is one which is in

arrears by more than 60 days and/or for which impairment

triggers have been identifi ed. A high risk client is one who is

in arrears and/or for whom impairment triggers have been

identifi ed and who fails to respond to initial legal action (e.g.

letter of demand). High risk clients include those for which

legal action is in progress or where the client has ceased

manufacturing or has been placed in liquidation.

Impaired loans and investmentsImpaired loans and investments are loans and investments for

which the Group determines that it is probable that it will be

unable to collect all principal and interest due according to

the contractual terms of the loan/investment agreements.


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Past due but not impaired loansThese are loans and securities where contractual interest or

principal payments are past due but the Group believes that

impairment is not appropriate on the basis of level of security/

collateral available and/or the stage of collection of amounts

owed to the Group.

Allowances for impairmentThe Group establishes an allowance for impairment losses that

represents its estimate of incurred losses in its loan portfolio.

The main components of this allowance are a specifi c loss

component that relates to individually signifi cant exposures,

and a collective loan loss allowance on the entire portfolio.

Renegotiated loansLoans with renegotiated terms are loans that have been

restructured due to deterioration in the borrower’s fi nancial

position and where the Group has made concessions that it

would not otherwise consider. Once the loan is restructured

it remains in this category independent of satisfactory

performance after restructuring.

CollateralThe Group holds collateral against loans and advances to

clients in the form of mortgage bonds over property, other

registered securities over assets and guarantees. Estimates

of fair values are based on the value of collateral assessed at

the time of borrowing and are generally not updated, except

when a loan is individually assessed as impaired.

An estimate of the fair value of collateral held against fi nancial

assets is shown below:

Group CompanyIDC fi nancing activities (Rand million) 2012 2011 2012 2011

Against impaired assets

General notarial bond 3 216 538 3 216 538

Special notarial bonds 223 96 223 96

Mortgage bond 782 518 782 518

Other – 19 – 19

4 221 1 171 4 221 1 171

Gross value of impaired loans as at 31 March 4 864 3 088 4 237 3 088

Against loans in arrears and not impaired

General notarial bond 1 305 329 1 305 329

Mortgage bond 521 444 521 444

Special notarial bond 201 168 201 168

Guarantees 102 – 102 –

Other 230 – 230 –

2 359 941 2 359 941

Gross value of loans in arrears not impaired as at 31 March 467 271 465 270

Valuation of fi nancial instruments The Group measures fair values using the following fair value

hierarchy that refl ects the signifi cance of the inputs used in

making the measurements:

Level 1: Quoted market price (unadjusted) in an active

market for an identical instrument.

Level 2: Valuation techniques based on observable inputs,

either directly (i.e. as prices) or indirectly (i.e. derived

from prices). This category includes instruments

valued using: quoted instruments where the

valuation technique includes inputs not based

on observable data and includes instruments

that are valued based on quoted prices for similar

instruments where signifi cant unobservable

adjustments or assumptions are required to refl ect

diff erences between the instruments.

Level 3: Valuation techniques using signifi cant unobservable

inputs. This category includes all instruments where

the valuation technique includes inputs not based

on observable data and includes instruments

that are valued based on quoted prices for similar

instruments where signifi cant unobservable

adjustments or assumptions refl ect diff erences

between the instruments.



Group 2012 Level 1 Level 2 Level 3 Total

Derivative assets held for risk management – 7 – 7 Listed equities 54 381 – – 54 381 Unlisted equities – 6 308 – 6 308 Preference shares – 8 975 – 8 975

54 381 15 290 – 69 671

Derivative liabilities held for risk management – 5 – 5

Group 2011 Level 1 Level 2 Level 3 Total

Derivative assets held for risk management – 10 – 10

Listed equities 56 664 – – 56 664

Unlisted equities – 5 007 – 5 007

Preference shares – 8 895 – 8 895

56 664 13 912 – 70 576


Company 2012 Level 1 Level 2 Level 3 Total

Derivative assets held for risk management – 6 – 6 Listed equities 34 647 – – 34 647 Unlisted equities – 6 102 – 6 102 Preference shares – 8 975 – 8 975

34 647 15 083 – 49 730


Company 2011 Level 1 Level 2 Level 3 Total

Derivative assets held for risk management – 4 – 4

Listed equities 35 811 – – 35 811

Unlisted equities – 4 765 – 4 765

Preference shares – 8 895 – 8 895

35 811 13 664 – 49 475



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Financial: Market riskMarket risk is the risk that the value of a fi nancial position or

portfolio will decline due to adverse movements in market

rates. The movements are mainly as a result of changes

in interest rates, foreign exchange rates, liquidity position

and equity prices. Also, factors such as political, social and

regulatory environments may have an impact on the fi nancial

position and portfolio.

The Asset and Liability Committee (ALCO) provides the

objective oversight and makes delegated decisions on all

fi nancial market risk information. The ALCO ensures that

scenario planning and an analysis process on IDC’s statement

of fi nancial position in respect of all key fi nancial market risks

is executed, as well as optimising the statement of fi nancial

position in that the likely eff ects of risk exposures on the

IDC’s earnings are assessed and appropriate actions taken;

with particular analytical emphasis on:

• Monitoring and managing the composition, size

and maturity of the IDC asset/liability portfolio

• Monitoring the investment products in terms of statement

of fi nancial position structure and risk

• Reviewing cash fl ow forecasts and performing liquidity,

interest rates, foreign exchange rates and equity price stress

• Testing

• Ensuring that the asset/liability portfolio complies with

approved policies

Equity sensitivity analysisSensitivity analyses were performed on the company’s equity

portfolio, to indicate the possible eff ect on the fair value

should a range of variables change, e.g. cash fl ows, earnings,

net asset values, etc. These assumptions were built into the

applicable valuation models.

In calculating the sensitivities for investments the key input

variables were changed in a range from –10% to +10%.

The eff ect of each change on the value of the investment was

then recorded. The key variables that were changed for each

valuation technique were as follows:

• Discounted cash fl ow: net income before interest and tax

• Price earnings: net income

• Listed companies: share price

• Forced sale net asset value: net asset value

From the table below it is evident that a 10% increase in the

relevant variables, will have a R8 322 million increase in the

equity values as at 31 March 2012 (2011: R9 491 million) and

a 10% decrease will lead to a R8 757 million decrease in the

equity values (2011: R8 882 million):

Period 10% increase 10% decrease

31 March 2012 R8 322m (R8 757m)

31 March 2011 R9 491m (R8 882m)

Liquidity riskLiquidity risk is the probability that the Group will not be able

to meet its obligation promptly for all maturing liabilities,

increase in fi nancing assets, including off -balance sheet

commitments or any other fi nancial obligations the IDC may

have on a cost-eff ective and timely basis.

The liquidity risk is governed by the Asset and Liability

Management policy and measured against the risk tolerance.

The daily and short-term (up to 12 months) liquidity

investment management is performed by Corporate Treasury,

within the IDC Board approved Treasury limits. The bank

account liquidity buff er is determined as the aggregate of

the rolling next three months’ net cash fl ows. The IDC holds

suffi cient liquid assets to meet any shortfall in cash fl ow

requirements.

The exposure to liquidity risk has been covered during the

period ended 31 March 2012:

Period Liquidity cover

required Performance

31 March 2012 R3 874m 2.25 times

31 March 2011 R3 304m 2.10 times

Repricing risk of assets in the liquidity buff er portfolio is kept to a minimum as it is designed to protect the cash values in a three-month horizon.

Interest rate risk managementInterest rate risk is the risk that the net value of the IDC’s

asset portfolio and that of the liability portfolio are negatively

aff ected by changes in interest rates. The interest rate risk

is governed by the Asset and Liability Management Policy.

The principal analytical technique used to quantify and

measure IDC’s interest rate risk is “Gap Analysis”.

All assets, liabilities and derivative instruments are categorised

in gap intervals/time buckets based on their repricing

characteristics. Assets and liabilities for which no specifi c

contractual repricing or maturity dates exist, are placed in

gap maturity buckets based on management’s discretion and

the most likely repricing behaviour.



Interest rate sensitivity mismatch – Finance activitiesRSA and RSL (Rate Sensitive Assets and Rate Sensitive Liabilities)

Interest rate sensitivity mismatch – March 2012 (Rand million)

Within 3 months

After 3 months but

within 6 months

After 6 months but

within a year Greater than

a year

Assets 7 843 2 107 2 975 3 285 Liabilities (80) (97) (551) (8 195)

Interest rate sensitivity mismatch 7 763 2 010 2 424 (4 910)

Cumulative interest rate sensitivity mismatch 7 763 9 773 12 197 7 287 Cumulative interest rate sensitivity mismatch as a % of total assets 7.1 9.0 11.2 6.7

Interest rate sensitivity mismatch – March 2011 (Rand million)

Within 3 months

After 3 months but

within 6 months

After 6 months but

within a yearGreater than

a year

Assets 6 083 1 302 4 536 3 927

Liabilities (538) (348) (480) (4 593)

Interest rate sensitivity mismatch 5 545 954 4 056 (666)

Cumulative interest rate sensitivity mismatch 5 545 6 499 10 555 9 889

Cumulative interest rate sensitivity mismatch as a % of total assets 5.2 6.1 9.9 9.3

Furthermore, interest rate risk management is monitored through the sensitivity analysis done to the fi nancial assets and liabilities.

A 100 basis points (bps) increase/(decrease) in market interest rates resulted in the following sensitivities:

Interest rate sensitivity – Finance activitiesEff ect of a 100 basis point increase/(decrease) in market rates:

2012 Rand US Dollar Euro Total

+ 100 bps rate shock for assets 184.7 5.3 0.4 190.4+ 100 bps rate shock for liabilities (40.3) (5.2) (0.9) (46.4) Net effect 2012 + 100 bps rate shock 144.4 0.1 (0.5) 144.0– 100 bps rate shock (144.4) (0.1) 0.5 (144.0)


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2011 Rand US Dollar Euro Total

+ 100 bps rate shock for assets 133.1 3.4 0.2 136.7

+ 100 bps rate shock for liabilities (25.6) (3.9) (0.8) (30.3)

Net effect

2011

+ 100 bps rate shock 107.5 (0.5) (0.6) 106.4

– 100 bps rate shock (107.5) 0.5 0.6 (106.4)

A 100 bps increase in all rates would increase the forecasted net interest income of the IDC by R144.0 million (2011: R106.4 million).

A 100 bps decrease in all rates would result in a decrease of forecasted net interest income by R144.0 million (2011: R106.4 million).

Foreign exchange riskForeign exchange risk is the risk that adverse changes in

exchange rates have a negative impact on the economic value

of the IDC. Foreign currency risk is governed by the Asset

and Liability Management policy and is also limited by the

IDC Board policy which states that 100% forward exchange

cover is required for all foreign currency exposure, unless the

fi nancing is made available in foreign currency and matched

to foreign borrowings.

All foreign currency risk is hedged through the utilisation

of FECs or cross-currency swaps where appropriate, except

where there is a natural hedge.

Currency US Dollar mismatch

Finance activities 2012

Figures in Rand millionWithin 3 months

After 3 months but

within 6 months

After 6 months but


a year Total

Assets 62.8 48.7 86.2 380.6 578.3 Liabilities (6.3) (7.5) (62.6) (438.9) (515.3)

Currency mismatch before hedging 56.5 41.2 23.6 (58.3) 63.0 Hedging – FECs 2.6 – – – 2.6

Currency mismatch after hedging 59.1 41.2 23.6 (58.3) 65.6

Cumulative currency mismatch 59.1 100.3 123.9 65.6 –

Currency US Dollar mismatch



After 3 months but

within 6 months

After 6 months but


a year Total

Assets 52.2 20.1 41.4 282.0 395.7

Liabilities (70.9) (38.8) (93.3) (184.0) (387.0)

Currency mismatch before hedging (18.7) (18.7) (51.9) 98.0 8.7

Hedging – FECs 2.7 3.5 – – 6.2

Currency mismatch after hedging (16.0) (15.2) (51.9) 98.0 14.9

Cumulative currency mismatch (16.0) (31.2) (83.1) 14.9 –



Currency Euro mismatch



After 3 months but

within 6 months

After 6 months but


a year Total

Assets 10.0 3.0 3.6 35.4 52.0Liabilities (3.1) (2.0) (5.1) (81.3) (91.5)

Currency mismatch before hedging 6.9 1.0 (1.5) (45.9) (39.5)Hedging – FECs 50.4 – – – 50.4

Currency mismatch after hedging 57.3 1.0 (1.5) (45.9) 10.9

Cumulative currency mismatch 57.3 58.3 56.8 10.9 –

Currency Euro mismatch


Figures in Rand million Within 3 months

After 3 months but

within 6 months

After 6 months but


a year Total

Assets 4.7 2.8 5.5 9.5 22.5

Liabilities (5.3) (4.8) (9.9) (57.0) (77.0)

Currency mismatch before hedging (0.6) (2.0) (4.4) (47.5) (54.5)

Hedging – FECs 50.6 3.8 – – 54.4

Currency mismatch after hedging 50.0 1.8 (4.4) (47.5) (0.1)

Cumulative currency mismatch 50.0 51.8 47.4 (0.1) –


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Currency Japanese Yen mismatchFinance activities 2011


After 3 months but

within 6 months

After 6 months but


a year Total

Liabilities (237.0) – (220.0) – (457.0)

Currency mismatch before hedging (237.0) – (220.0) – (457.0)

Hedging – FECs 237.0 – 220.0 – 457.0

Currency mismatch after hedging – – – – –

Cumulative currency mismatch – – – – –

Residual contractual maturities of fi nancial liabilitiesFinance activities – 31 March 2012

EURO SA RAND FOREIGN

RAND USD JAPANESE

YEN

Principal 92 3 900 128 515 –Interest 11 547 18 30 –

103 4 447 146 545 –

Payable within 1 year 12 221 44 87 –Due after 1 year but within 5 years 32 4 226 102 392 –Due after 5 years 59 – – 66 –

Residual contractual maturities of fi nancial liabilitiesFinance activities – 31 March 2011

EURO SA RAND FOREIGN

RAND USD JAPANESE

YEN

Principal 77 2 400 164 387 457

Interest 7 395 39 17 5

84 2 795 203 404 462

Payable within 1 year 12 100 50 194 462

Due after 1 year but within 5 years 39 2 695 135 179 –

Due after 5 years 33 – 18 31 –

Foreign rand – Rand facilities arranged with counterparties outside South Africa

Interest rates Range

SA Rand = 3-month JIBAR 5.600% – 6.800%

EUR = 3-month EURIBOR 0.681% – 5.738%

USD = 3-month LIBOR 0.468% – 1 310%



Capital managementThe IDC is accountable to its sole shareholder, the Economic

Development Department. The performance as well as

management of IDC capital is supported by the agreement

between the Corporation and the shareholder in a form of

the Shareholder’s Compact which outlines the agreements

between the two parties.

Regulatory capitalIDC is not required by law to keep any level of capital but has

to utilise its capital to achieve the shareholder’s mandate.

The IDC Act of 1940 dictates that IDC can be geared up to

a 100% of its capital.

Risk appetiteThe Board approved risk appetite limit serves as a monitoring

tool to ensure that the impact of investment activities in

the Corporation do not have a negative impact on the

Corporation’s fi nancial position.

There were no changes to the Group’s approach to capital

management during the year.

Group CompanyFigures in Rand million 2012 2011 2012 2011

4. Cash and cash equivalents

Cash and balances with bank 1 035 1 503 342 912

Negotiable securities 6 790 4 325 6 775 4 325

Bank overdraft (3) (14) – –

7 822 5 814 7 117 5 237

Current assets 7 825 5 828 7 117 5 237

Current liabilities (3) (14) – –

7 822 5 814 7 117 5 237

Cash and cash equivalents comprises cash deposits with banks

and negotiable securities maturing within three months.

These attract interest at market-related rates.

5. Trade and other receivables

Trade receivables 1 010 721 275 224

Pre-payments 42 21 – –

Other receivable 215 165 – –

1 267 907 275 224

Trade and other receivables pledged as securityA subsidiary entered into an invoice discounting agreement

with Nedbank Limited whereby it has discounted all its debtors

and has given fi rst cession of all receivables as security for a

R75 million (2011: R40 million) fi nance facility advanced to it.

A subsidiary South African Fibre Yarn Rugs (Pty) Limited has

ceded its trade and other receivables in an amount of R27 million

(2011: R27 million) as security to ABSA Finance Co (Pty) Limited.


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tem

ents

Group Company

Figures in Rand million 2012 2011 2012 2011

6. Loans and advances Loans and advances to clients* 18 507 13 901 17 599 11 142

Specifi c impairment of loans and advances (2 307) (1 663) (2 307) (1 663)

Portfolio impairment of loans and advances (222) (185) (222) (185)

15 978 12 053 15 070 9 294

* Interest rates range between 5% and 20%.

Reconciliation of impairment of loans and advances

Specific allowances for impairment

Balance at 1 April 1 663 1 997 1 663 1 997

Impairment loss for the year

• Charge/(release) for the year 925 (232) 925 (232)

• Recoveries (67) (21) (67) (21)

• Eff ect of foreign currency movements (25) (7) (25) (7)

Write off s (189) (74) (189) (74)

Balance at 31 March 2 307 1 663 2 307 1 663

Portfolio allowance for impairment

Balance at 1 April 185 170 185 169

Impairment charge for the year 37 15 37 16

Balance at 31 March 222 185 222 185

Total allowances for impairment 2 529 1 848 2 529 1 848

Maturity of loans and advances

• Due within three months 2 800 2 170 2 799 2 157

• Due after three months but within one year 2 359 1 364 2 358 1 364

• Due after one year but within two years 3 419 2 517 3 419 2 516

• Due after two years but within three years 2 774 1 887 2 774 1 887

• Due after three years but within four years 3 076 1 495 3 076 1 495

• Due after four years but within fi ve years 2 328 1 692 2 328 1 692

• Due after fi ve years 1 751 2 776 845 31

• Impairment of loans and advances (2 529) (1 848) (2 529) (1 848)

15 978 12 053 15 070 9 294

The Group has not reclassifi ed any fi nancial assets from cost or amortised cost to fair value, or from fair value to cost or amortised cost during the current or prior year.




7. Investments

Listed equities 54 428 56 846 34 694 35 993

Unlisted equities 6 335 5 099 6 129 4 857

Preference shares 8 923 8 821 8 923 8 821

Preference shares – option values 1 205 999 1 205 999

70 891 71 765 50 951 50 670

Impairment of listed shares (47) (182) (47) (182)

Impairment of unlisted shares (27) (92) (27) (92)

Impairment of preference shares (1 153) (925) (1 153) (925)

Shares at fair value 69 664 70 566 49 724 49 471

Specifi c allowances for impairment:

Listed equities


Impairment (reversal)/charge for the year (135) 104 (135) 97

47 182 47 182

Unlisted equities:


Impairment reversal for the year (65) (5) (65) (5)

27 92 27 92

Preference shares:


Impairment charge for the year 228 126 228 126

1 153 925 1 153 925

Comprises:

Impairment of listed shares (47) (182) (47) (182)

Impairment of unlisted shares (27) (92) (27) (92)

Impairment of preference shares (1 153) (925) (1 153) (925)

(1 227) (1 199) (1 227) (1 199)

8. Non-current assets held-for-sale

Assets and liabilities

Non-current assets held for sale

Property, plant and equipment 15 15 – –

Certain of the assets and liabilities relating to Prilla 2000 (Pty) Limited have been presented as held-for-sale following the decision to

discontinue its operation in Cape Town. The decision was made by its directors to discontinue these operations due to a fi re at the

branch. The non-current assets are to be sold piecemeal.


Ann

ual fi

nan

cial

sta

tem

ents

CompanyFigures in Rand million 2012 2011

9. Investments in subsidiariesFair value of investments 29 939 30 016

Impairment of shares (58) (58)

Loans receivable 2 807 2 065

Impairment of loans (1 173) (788)

31 515 31 235

IDC subsidiariesShare class

Issuedshare

capital %

interest

Shares at cost and fair value

IDC net indebtednessto the holding

company

IDC net indebtednessby the holding

companyRm

2012Rm

2011Rm

2012Rm

2011Rm

2012Rm

2011

Arengo 316 (Pty) Ltd Ordinary – 100 – – 98 79 – –

Crossley Holdings (Pty) Ltd Ordinary – 59 – – 242 162 – –

Crossley Holdings (Pty) Ltd Preference 7 – 25 25 – – – –

Dymson Nominee (Pty) Ltd Ordinary – 100 2 2 40 39 – –

Findevco (Pty) Ltd Ordinary – 100 – – – – (274) (274)

Foskor (Pty) Ltd Ordinary 9 59 8 8 500 100 – –

Herdmans SA (Pty) Ltd Ordinary – 100 – – 141 – 84 –

Impofi n (Pty) Ltd Ordinary – 100 – – – – (88) (88)

Kindoc Investments Ltd Ordinary – 100 – – 154 154 – –

Kindoc Sandton Properties (Pty) Ltd Ordinary – 100 – – 220 212 – –

Konbel (Pty) Ltd Ordinary – 100 – – – – (10) (10)

Konoil (Pty) Ltd Ordinary – 100 – – – – (6 919) (6 227)

Prilla 2000 (Pty) Ltd Ordinary 4 100 14 14 324 244 – –

Sustainable Fibre Solutions Ordinary – 67 4 4 122 122 – –

South African Fibre Yarn Rugs Ordinary 37 69 15 15 235 229 – –

Sheraton Textiles (Pty) Ltd Ordinary – 80 – – 47 47 – –

Other subsidiaries Ordinary – 100 – 1 684 593 – (16)

68 69 2 807 2 065 (7 291) (6 615)

Fair value adjustment 29 871 29 947 – – – –

Impairment adjustment (58) (58) (1 173) (788) – –

Fair value 29 881 29 958 1 634 1 277 (7 291) (6 615)

Legally the IDC owns 59% of Foskor but for accounting purposes an eff ective 85% of Foskor is consolidated.

Profi ts and lossesThe aggregate net profi ts and losses after taxation of subsidiaries attributable to the IDC were as follows:

Profi ts 845 829

Losses (236) (359)

609 470

All subsidiaries have the same reporting date as the holding company, except for Sustainable Fibre Solutions (Pty) Ltd whose year-end

is June. The company prepared audited IFRS compliant fi nancials for consolidation purposes as at 31 March 2012.




10. Investments in associates, partnerships and joint ventures

Associated companies 10 519 11 127 12 278 13 740

Fair value of investments – listed shares in associates – – 1 541 1 823

Fair value of investments – unlisted shares in associates – – 10 194 11 000

Impairment of shares – – (907) (699)

Net asset value at acquisition 1 441 1 453 – –

Accumulated equity-accounted income 15 767 15 313 – –

Accumulated equity-accounted losses and impairments (8 412) (7 524) – –

Loans receivable 2 361 2 410 2 361 2 397

Impairment of loans (638) (525) (911) (781)

Partnerships and joint ventures 48 278 48 278

Partners’ capital 121 158 121 158

Accumulated profi ts (70) 127 (70) 127

Impairment of partners’ capital (3) (7) (3) (7)

10 567 11 405 12 326 14 018

Included in fi nancing are the following investments which have been made in terms of section 3(a) of the Industrial Development Act with the approval of the State President:

Foskor (Pty) Limited – at cost – – 7 7

Sasol Limited – at cost 131 131 – –

131 131 7 7

A register of investments is available and is open for inspection at the IDC’s registered offi ce.


Ann

ual fi

nan

cial

sta

tem

ents

Equity-accounted associated entities

Companies Accounting

periods* %

interest

Total exposure

Rm2012

Totalexposure

Rm2011

Broadband Infraco (Pty) Ltd

Provides telecommunication infrastructure 26.00 349 404

Broodkraal Landgoed (Pty) Ltd Farms table grapes 1/07/10 – 30/06/11 32.00 121 125

Capensis Management Operates a hospital 1/03/11 – 29/02/12 22.52 212 219

Savannah ConsortiumMining and processing platinum metals 1/07/10 – 30/06/11 29.46 397 532

Duferco Steel Processing (Pty) Ltd Processes steel coil 1/10/10 – 30/09/11 50.00 114 153

Eastern Produce Malawi Ltd

Farms tea coff ee and macadamia nuts 1/01/11 – 31/12/11 26.80 58 73

Hans Merensky Holdings (Pty) Ltd

Holds investments in timber and agricultural industries 1/01/12 – 31/12/11 47.10 523 460

Hernic Ferrochrome (Pty) Ltd Operates a ferrochrome plant 21.30 450 494

Hulamin Limited Asset-leasing company 1/01/11 – 31/12/11 29.80 1 398 1 319

Imbani Platinum SPV (Pty) Ltd Platinum mining 1/01/11 – 31/12/11 25.00 – 170

Incwala Resources (Pty) Ltd Platinum mining 1/10/10 – 30/09/11 23.56 836 1 859

Karsten Boerdery (Pty) Ltd Farms table grapes and dates 1/10/10 – 30/09/11 36.56 204 187

Merafe LimitedOperates chrome and alloys plant 1/01/11 – 31/12/11 21.90 600 583

Mozal S.A.R.L.Produces primary aluminium metal 1/07/10 – 30/06/11 24.04 2 617 2 357

Sheba’s Ridge PlatinumProduce base metals and platinum group metals 1/04/11 – 31/03/12 26.00 104 44

Umicore Catalyst (Pty) LtdManufactures automotive catalysts 1/01/11 – 31/12/11 35.00 408 72

York Timber Limited Sawmilling 1/07/10 – 30/06/11 29.80 619 591

Other associates various 1 509 1 485

10 519 11 127

* The accounting periods for which the fi nancial statements of the associated entities have been prepared, where they are diff erent from that of the investor, are disclosed above.



CompanyFigures in Rand million 2012 2011

Fair value

Opening fair value of shares 12 124 11 568

Movement in fair value during the year:

Chuma/Malibongwe/Savannah Platinum SPV (Pty) Limited (355) (214)

Hans Merensky Holdings (Pty) Limited 38 (31)

Hernic Ferrochrome (Pty) Limited (11) (112)

Hulamin (Pty) Limited 61 (49)

Incwala Resources (Pty) Limited (891) (199)

Merafe Limited (341) (87)

Mozal S.A.R.L. 352 545

York Timber Limited 2 49

Imbani Platinum SPV (Pty) Limited (74) (247)

Other (77) 901

10 828 12 124

GroupFigures in Rand million 2012 2011

The aggregate amounts attributable to the IDC were as follows:

Non-current assets 47 822 47 470

Current assets 21 258 20 931

69 080 68 401

Equity 38 297 41 852

Non-current liabilities 16 179 14 995

Current liabilities 14 604 11 554

69 080 68 401

Statement of comprehensive income:

Revenue 33 600 33 023

Profi ts 719 2 032

Losses (1 162) (858)


Ann

ual fi

nan

cial

sta

tem

ents

Partnerships and joint ventures

Percentageinterest

(%)

Totalexposure

2012

Totalexposure

2011

Horizon TechVentures Partnership 52.29 – 87

New Africa Mining Fund 19.87 38 81

Other Wholesale Venture Capital Funds various 10 110

48 278

Profi ts – 18

Losses (7) (4)

(7) 14


11. Inventories Consumable stores 325 301 10 11

Raw materials, components 646 300 – –

Finished goods 330 282 – –

Work in progress 37 20 – –

Phosphate rock 522 348 – –

1 860 1 251 10 11

Group inventory to the value of R4.7 million was written down as a net realisable value adjustment at 31 March 2012 (2011: R1.0 million).

Inventory pledged as security

General notarial bonds are registered over inventories to the value of R15 million in favour of ABSA Bank as at 31 March 2012 (2011: R40 million).




12. Deferred tax

Composition of deferred taxation asset is as follows:

Capital and other losses 20 18 – –

Calculated tax losses 2 2 – –

22 20 – –

Balance at the beginning of the year 20 16 – –

Calculated tax losses – (2) – –

Temporary diff erences 2 6 – –

Other 2 6 – –

Balance at the end of the year 22 20 – –

Composition of deferred taxation liability is as follows:

Capital and other allowances 227 338 (519) (442)

Capital gains and losses and fair value adjustments 7 139 4 768 8 522 6 676

7 366 5 106 8 003 6 234

Reduced by taxation on:

Calculated taxation losses (76) (95) – –

7 290 5 011 8 003 6 234

At the beginning of the year 5 011 3 795 6 234 5 223

Calculated taxation losses 19 (76) – –

Temporary diff erences 2 260 1 292 1 769 1 011

• Property, plant and equipment 42 1 16 (2)

• Provisions (371) (114) (371) (84)

• Mining assets 22 238 – –

• Capital gains and losses and fair value adjustments 2 371 1 102 1 845 1 113

• Other 196 65 279 (16)

Balance at the end of the year 7 290 5 011 8 003 6 234


Ann

ual fi

nan

cial

sta

tem

ents

13. Investment property Group 2012 2012 2011 2011Figures in Rand million Cost Fair value Cost Fair value

Land and buildings leased to industrialists 11 11 9 9

Land held for development 87 87 74 74

Farming land and buildings 19 19 17 17

117 117 100 100

Company Cost Fair value Cost Fair value

Land and buildings leased to industrialists 9 9 9 9

Fair value – Group – 2012Figures in Rand million

Opening fairvalue

Fair valueadjustments

Additionsthrough business

combinationsClosing fair

value

Land and buildings leased to industrialists 9 – 2 11

Land held for development 74 13 – 87Farming land and buildings 17 2 – 19

100 15 2 117

Fair value – Group – 2011Figures in Rand million

Opening fairvalue Disposals

Closing fairvalue

Land and buildings leased to industrialists 9 – 9

Land held for development 76 (2) 74

Farming land and buildings 17 – 17

102 (2) 100

Fair value – Company – 2012Figures in Rand million

Opening fairvalue

Closing fairvalue

Land and buildings leased to industrialists 9 9

Fair value – Company – 2011Figures in Rand million

Opening fairvalue

Closing fairvalue

Land and buildings leased to industrialists 9 9



14. Property, plant and equipment Group 2012 2011

Figures in Rand millionCost/

ValuationAccumulateddepreciation

Carrying value

Cost/Valuation

Accumulateddepreciation

Carrying value

Land and buildings 1 681 (389) 1 292 1 632 (370) 1 262

Plant and machinery 5 233 (2 659) 2 574 4 617 (2 468) 2 149

Aircraft 194 (45) 149 187 (33) 154

Furniture and fi xtures 82 (47) 35 67 (33) 34

Motor vehicles 44 (12) 32 9 (7) 2

Asset under construction 690 – 690 986 – 986

Total 7 924 (3 152) 4 772 7 498 (2 911) 4 587

Company 2012 2011

Figures in Rand millionCost/

ValuationAccumulateddepreciation

Carrying value

Cost/Valuation

Accumulateddepreciation

Carrying value

Land and buildings – – – 11 – 11

Plant and machinery 103 (93) 10 167 (138) 29

Aircraft 141 (42) 99 132 (34) 98

Furniture and fi xtures 22 (22) – 21 (21) –

Motor vehicles 6 (5) 1 5 (5) –

Asset under construction – – – 12 – 12

Total 272 (162) 110 348 (198) 150

Reconciliation of property, plant and equipment – Group – 2012Figures in Rand million

Openingbalance Additions Disposals Transfers

Revalu –ations

Depreci -ation

Impair –ment

reversalCarrying

value

Land and buildings 1 262 173 (13) (29) (69) (32) – 1 292 Plant and machinery 2 149 571 (36) 65 – (245) 70 2 574 Aircraft 154 – – – 9 (14) – 149 Furniture and fi xtures 34 13 – 2 – (14) – 35 Motor vehicles 2 33 – – – (3) – 32 Asset under construction 986 24 – (320) – – – 690

4 587 814 (49) (282) (60) (308) 70 4 772

Reconciliation of property, plant and equipment – Group – 2011Figures in Rand million

Openingbalance Additions

Additionsthrough businesscombin-

ations Disposals TransfersRevalu-

ationsDepreci-

ation

Impair -ment

lossCarrying

value

Land and buildings 1 207 244 17 (3) 87 (232) (38) (20) 1 262 Plant and machinery 1 849 476 42 (3) (6) 1 (209) (1) 2 149 Aircraft 176 – – – – – (11) (11) 154 Furniture and fi xtures 7 39 – – – – (12) – 34 Motor vehicles 2 3 – – – – (3) – 2 Assets under construction 895 172 – – (81) – – – 986

4 136 934 59 (6) – (231) (273) (32) 4 587


Ann

ual fi

nan

cial

sta

tem

ents

Reconciliation of property, plant and equipment – Company – 2012Figures in Rand million

Openingbalance Additions Disposals Transfers

Revalu -ations

Depreci -ation Total

Land and buildings 11 – (11) – – – –Plant and machinery 29 3 (26) 12 – (8) 10Aircraft 98 – – – 9 (8) 99Furniture and fi xtures – 5 – – – (5) –Motor vehicles – 1 – – – – 1Asset under construction 12 – – (12) – – –

150 9 (37) – 9 (21) 110

Reconciliation of property, plant and equipment – Company – 2011Figures in Rand million

Openingbalance Additions Depreci ation

Impair mentloss Total

Land and buildings 11 – – – 11Plant and machinery 29 5 (5) – 29Aircraft 118 – (8) (12) 98Furniture and fi xtures – 11 (11) – –Motor vehicles – 1 (1) – –Asset under construction – 12 – – 12

158 29 (25) (12) 150



A register containing the information required by Regulation 25(3) of the Companies Regulations 2011 is available for inspection at the

registered offi ce of the company.


Group2012 2011

Cost – capitalised fi nance lease 42 42

Accumulated depreciation (16) (14)

Carrying amount 26 28

Registers containing details of land and buildings, including details of any revaluations and encumbrances, are kept at the registered

offi ces of the companies concerned.

15. Biological assets

Group


2012 2011

CostAccumulateddepreciation Fair value Cost

Accumulateddepreciation Fair value

Maize 8 – 8 4 – 4

Planted walnut trees* 4 – 4 4 – 4

Pecan nuts** 2 – 2 – – –

Total 14 – 14 8 – 8

Company


2012 2011

CostAccumulateddepreciation Fair value Cost

Accumulateddepreciation Fair value

Maize – – – 4 – 4

Reconciliation of biological assets – Group – 2012Figures in Rand million

Opening fairvalue Additions

Gains orlosses arisingfrom changes

in fair valueClosing fair

value

Planted pecan nut trees – 2 – 2

Maize 4 3 1 8Planted walnut trees 4 – – 4

8 5 1 14

Reconciliation of biological assets – Group – 2011Figures in Rand million


Decreasesdue to harvest

/sales Disposals

Farmingdevelopment

costClosing fair

value

Maize 3 4 – (3) – 4

Planted pistachio trees 2 – (2) – – –

Planted walnut trees 3 – – – 1 4

8 4 (2) (3) 1 8


Ann

ual fi

nan

cial

sta

tem

ents

Reconciliation of biological assets – Company – 2012Figures in Rand million

Opening fairvalue

Disposals

Closing fairvalue

Planted walnut trees 4 (4) –

Reconciliation of biological assets – Company – 2011Figures in Rand million


Decreasesdue to

harvest/sales Disposals Closing fair

value

Planted walnut trees 3 4 – (3) 4

Planted pistachio trees 2 – (2) – –

5 4 (2) (3) 4

* Biological assets comprise planted walnut trees and because there is no other commercial crop grown in South Africa or anywhere in the world with the same climate conditions or even the same tree cultivars – it is thus not possible to benchmark this project on the basis of a similar project elsewhere in the world. This is a green fi eld project with high levels of uncertainty/risk. Although the revised project cash fl ow model is the best estimate available at this time, it has a high degree of risk and past reviews indicate that the cash fl ows could vary signifi cantly over time. Therefore biological assets are carried at cost less accumulated depreciation and impairment losses.

No depreciation has been expensed to date as the planted walnut trees are not yet producing signifi cant quantities of walnuts.

** Biological assets comprises pecan nut trees and because the trees were only planted during the current fi nancial year, there was too much uncertainty regarding the assumptions that would need to be made to perform an expected valuation. Therefore the pecan nut trees are carried at cost less accumulated depreciation and impairment losses.

No depreciation has been expensed to this date as the planted pecan nut trees are not yet producing any quantities of pecan nuts.

16. Intangible assets

Group


2012 2011 Cost/

ValuationAccumu latedamortisa tion

Carrying value

Cost/Valuation

Accumu latedamortisa tion

Carryingvalue

Goodwill 829 (829) – 820 (820) –

Computer software, other 6 (5) 1 6 (5) 1

Total 835 (834) 1 826 (825) 1

Reconciliation of intangible assets – Group – 2012Figures in Rand million

Openingbalance Additions Amortisation Total

Computer software, other 1 1 (1) 1

Reconciliation of intangible assets – Group – 2011Figures in Rand million

Openingbalance Additions Disposals

Impairmentloss Total

Goodwill – 202 – (202) –

Computer software, other 2 – (1) – 1

Total 2 202 (1) (202) 1




17. Share capital

Authorised

A shares of R1 each – 1 000 000 1 1 1 1

B shares of R1 each – 1 499 000 000 1 499 1 499 1 499 1 499

1 500 1 500 1 500 1 500

Issued

Ordinary Type A 1 1 1 1

Ordinary Type B 1 392 1 392 1 392 1 392

1 393 1 393 1 393 1 393

A shares are not transferable otherwise than by an Act of Parliament, however the B shares may be sold with the authorisation of the President of the Republic of South Africa.

The A shares held by the State shall entitle it to a majority vote.

18. Derivative financial instruments Derivative assets

Foreign exchange contract assets 7 10 6 4

Derivative liabilities

Foreign exchange contract liability 5 11 3 8

19. Trade and other payables

Trade payables 1 927 1 152 551 433

Accrued leave pay 91 84 59 52

Accrued bonus 268 308 236 207

2 286 1 544 846 692

Movement in accruals:

Bonuses

Balance at the beginning of the year 308 208 207 150

Additional accruals raised during the year 228 219 196 117

Utilised during the year (268) (119) (167) (60)

Balance at the end of the year 268 308 236 207

Leave pay

Balance at the beginning of the year 84 76 52 48

Additional accruals raised during the year 51 47 18 15

Utilised during the year (44) (39) (11) (11)



Ann

ual fi

nan

cial

sta

tem

ents


20. Other financial liabilitiesForeign loans 6 423 4 959 6 384 4 895

Domestic loans 3 500 1 718 11 430 9 000

9 923 6 677 17 814 13 895

Non-current liabilitiesForeign loans 5 675 3 595 5 685 3 560

Domestic loans 2 404 962 2 355 907

8 079 4 557 8 040 4 467

Current liabilitiesForeign loans 748 1 364 699 1 335

Domestic loans 1 096 756 9 075 8 093

1 844 2 120 9 774 9 428

9 923 6 677 17 814 13 895

Foreign Loans Interest rate• US Dollar 0.35% to 2.355% 3 956 2 618 3 917 2 554

• Euro 0.67% to 5.738% 938 740 938 740

• Japanese Yen 1.4% to 1.45% – 37 – 37

• SA Rand-denominated 5.5% to 6.795% 1 529 1 564 1 529 1 564

6 423 4 959 6 384 4 895

Maturity of foreign loans• Due within one year 748 1 364 699 1 335

• Due after one year but within fi ve years 4 610 3 051 4 620 3 016

• Due after fi ve years 1 065 544 1 065 544

6 423 4 959 6 384 4 895

Maturity of domestic loans• No set dates of repayment – – 9 075 8 093

• Due within one year 1 096 756 – –

• Due after one year but within fi ve years 2 369 928 2 355 907

• Due after fi ve years 35 34 – –

3 500 1 718 11 430 9 000




Long-term domestic loans:Secured loansMhlatuzi Water Board 14.4% 20 22 – –

DEG 6-month – 6 – –

EURIBOR

rate + 2.75%

The Standard Bank of South Africa Limited Prime 2 2 – –

Eastern Cape Development Corporation Prime – 2% to 5 5 – –

Prime + 2%

Thyssen Krupps Interest free 5 5 – –

Unsecured loansOther various 17 15 – –

UIF Bond 5% 2 355 907 2 355 907

2 404 962 2 355 907

Short-term domestic loans:Unsecured loans from subsidiaries– Loans with no fi xed terms of repayment Interest free – – 7 291 6 615

Secured loans• Loans with no fi xed terms of repayment Money 1 096 749 1 249 943

market-

related

• Loans with no fi xed terms of repayment Interest free – – 535 535

• Loans with no fi xed terms of repayment 10.071% – 7 – –

1 096 756 9 075 8 093

Interest and non-interest-bearing loans• Long-term interest-bearing loans 8 055 4 532 8 040 4 467

• Short-term interest-bearing loans 1 844 2 120 1 948 2 278

9 899 6 652 9 988 6 745

• Long-term interest-free loans 24 25 – –

• Short-term interest-free loans – – 7 826 7 150

24 25 7 826 7 150

9 923 6 677 17 814 13 895


Ann

ual fi

nan

cial

sta

tem

ents

21. Provisions

Reconciliation of provisions – Group – 2012Figures in Rand million


Utilisedduring the

year

Change indiscount

factor Total

Environmental rehabilitation 301 6 (5) 12 314Trust fund (100) (6) – – (106)

201 – (5) 12 208

Reconciliation of provisions – Group – 2011Figures in Rand million


Utilisedduring the

year

Reversedduring the

year

Change indiscount

factor Total

Environmental rehabilitation 298 – (1) (2) 6 301

Trust fund (85) (15) – – – (100)

213 (15) (1) (2) 6 201

Reconciliation of provisions – Company – 2012Figures in Rand million

Openingbalance

Utilisedduring the

year Total

Environmental rehabilitation 53 (5) 48

Reconciliation of provisions – Company – 2011Figures in Rand million.

Openingbalance

Utilisedduring the

year Total

Environmental rehabilitation 54 (1) 53

Environmental rehabilitation liability

ColumbusColumbus Joint Venture was a partnership between IDC, Samancor Limited and Highveld Steel. The provision is for the rehabilitation of dumps of diff erent waste streams that was estimated at 4.3 million tonnes, which were not included in the sale of the Middleburg Stainless Steel in January 2002, and accordingly each partner was liable for its share of the rehabilitation. The rehabilitation is expected to be completed in 2016.

African ChromeAs a result of the processes used in the manufacture of

the chemical products of the company, the ground water

has become contaminated with a by-product Chrome 6.

In terms of minimum requirements of the National Water

Act, 37 of 1998, Part 5, Section 20 and the Environment

Conservation Act, 73 of 1989, Part V, Sub-sections 21 and 22,

the company is required to remove the contaminated water

and dispose of the waste material.

The Corporation, as primary shareholder, stands security

for the entire environmental provision until the land is fully

rehabilitated.

Assumptions taken into accountThe rehabilitation process comprises two phases, namely

Phase 1 and Phase 2.

The entire process is expected to take a period of three

years; with Phase 1 having commenced on 1 March 2012

and Phase 2 expected to be completed on 28 February

2015.

Phase 1 activities are expected to be completed by

31 October 2012. The amount expected to be incurred for

Phase 1 was based on contract agreements from suppliers.

The expenditure for Phase 1 is expected to be settled once

the work required for Phase 1 has been completed.



Phase 2 activities will commence once Phase 1 has been

completed. The expected date of commencement is

therefore 1 November 2012. An amount of R25 million

is expected to be incurred for Phase 2 activities, this

provisional amount was based on previous historical costs

and was adjusted for annual increases in disposal costs. It is

assumed that the amount incurred each year for Phase 2

activities will be settled at each respective year-end.

Uncertainty regarding the timing and amount to be

incurred for Phase 2 of the rehabilitation process still exists

as Phase 2 will be aff ected by the outcome of Phase 1.

The R186 government bond rate was used as the discount

rate. The rate was not adjusted for risks as there is no risk

relating to the technology used to rehabilitate the land.

FoskorA Group company continually contributes to the

Environmental Rehabilitation Trust, to ensure that adequate

funds are available to pay for mine closure and reclamation

costs. The Environmental Rehabilitation Trust is an

irrevocable Trust under the company’s control. This note

compares the net present value of the rehabilitation liability

to the assets held by the Trust.

The fi nancial assets held by the Trust are intended to fund

the environmental rehabilitation liability of Foskor (Pty) Ltd

and are not available for general purposes of the Group.

The objective of the Trust is to act as the fi nancial provider

for expenditure that its member, Foskor (Pty) Ltd, is likely

to incur in order to comply with the statutory obligation

for the environmental rehabilitation. The Trust is exempt

from tax.

The directors are aware of the estimated cost of

rehabilitation and are satisfi ed that adequate provision is

being made to meet this obligation. A contingent liability

has been recognised for the issuing of guarantees to the

Department of Mineral Resources.


22. RevenueDividends received 3 273 2 271 2 663 1 895

Interest received 1 562 1 318 1 572 1 329

Fee income 349 276 349 277

Farming manufacturing and mining income 5 801 5 100 – 23

10 985 8 965 4 584 3 524

Dividends received on available-for-sale financial assets

Listed 2 858 2 183 2 166 1 773

Unlisted 60 72 108 72

Associated companies – – 34 34

Preference shares income – options 355 16 355 16

3 273 2 271 2 663 1 895

Dividends received from the investments made in terms of section 3(a) of the Industrial Development Act.

Sasol Ltd 692 410 – –

23. Investment revenueInterest income

Cash and cash equivalents 293 247 280 225

Loans and advances to clients 1 243 944 1 288 992

Other 26 127 4 112

1 562 1 318 1 572 1 329


Ann

ual fi

nan

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ents


24. Finance costsCurrent borrowings 334 181 347 205

Finance leases 3 4 – –

Loss on foreign currency borrowings 58 110 – 110

Other interest paid 51 51 – –

446 346 347 315

25. Fee incomeFee incomeMetal fees 142 118 142 118

Guarantee fees 27 21 27 21

Other contract-related fees 165 114 165 115

Other fees 15 23 15 23

Total fee income 349 276 349 277

26. Net capital gainsProfi t and loss on sale of non-current assets held-for-sale and net assets of disposal groups 1 053 50 1 053 361

Capital losses on disposal of available-for-sale investments (175) (14) (175) (8)

878 36 878 353

27. Operating profitIs arrived at after taking into account the following:

Loss on sale of investment property – 2 – –

Revaluation of investment property (15) – – –

Depreciation on property, plant and equipment 308 273 21 25

Impairment on property, plant and equipment – 32 – 12

Reversal of impairment on property, plant and equipment (70) – – –

Loss/(profi t) on sale of property, plant and equipment 3 (15) – –

Amortisation on intangible assets 1 – – –

Research and development 1 2 – –

Project feasibility expenses 109 11 153 163

Impairment on other fi nancial assets 1 048 671 1 616 1 026

Employee costs 1 636 1 449 750 610

Operating lease rentals 18 12 5 4

Profi t on sale of non-current assets held-for-sale 9 – – –




Net increase/(decrease) in impairments

Agro-Industries 22 (96) 13 (64)

Public Private Partnerships – (357) – (357)

Strategic High Impact Projects (2) – (2) –

Mining and Mineral Benefi ciation 253 (13) 306 38

Chemicals and Allied Industries 18 29 71 16

Metals, Transportation and Machinery Products 138 38 177 98

Textiles 82 25 420 36

Forestry and Wood Products (21) (39) (2) 58

Media and Motion Pictures 151 1 198 40

Tourism 84 106 94 103

Healthcare (8) (43) (14) (68)

Information Communication Technology 26 103 65 103

Franchising (21) 4 (21) 4

Transportation, Financial Services and Other 35 68 35 68

Construction 141 97 141 97

Venture Capital (5) (72) (8) 18

Green Industries 35 10 37 10

Other (51) 113 (51) 104

877 (26) 1 459 304

Bad debts written off/(recovered)

Agro-Industries 35 41 35 41

Public Private Partnerships – 453 – 453

Strategic High Impact Projects 6 – 6 –

Mining and Mineral Benefi ciation (21) 11 (21) 11

Chemicals and Allied Industries 18 43 18 43

Metals, Transportation and Machinery Products 5 13 5 13

Textiles 4 44 4 44

Forestry and Wood Products 17 5 18 5

Media and Motion Pictures – 37 – 37

Tourism 21 2 21 2

Healthcare (7) 17 (7) 17

Information Communication Technology 4 4 4 6

Franchising 45 22 45 22

Transportation, Financial Services and Other 44 5 44 5

Other – – (15) 23

171 697 157 722


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ual fi

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28. Directors’ emoluments

Non-executive

Fees for services as directors:

Name(Rand thousand) 2012 2011

MW Hlahla* Chairman 292 542

MC Nkuhlu** Resigned 25 November 2011 250 409

LI Bethlehem*** 229 163

LR Pitot 196 241

LL Dhlamini 192 208

JC Mtshali Resigned 25 November 2011 190 314

SK Mapetla 167 272

MS Moloko Resigned 25 November 2011 148 205

JR Barton Resigned 25 November 2011 137 261

NG Nika Resigned 25 November 2011 117 286

BA Mabuza Appointed 25 November 2011 52 –

SM Rensburg Appointed 25 November 2011 45 –

BA Dames Appointed 25 November 2011 45 –

NN Nokwe Resigned 25 November 2011 39 195

MP Buthelezi Appointed 25 November 2011 33 –

RM Godsell Appointed 25 November 2011 21 –

JA Copelyn***** Appointed 25 November 2011 21 –

BN Njobe Resigned 10 January 2011 – 107

ZJ Vavi Appointed 25 November 2011 – –

NE Zalk**** – –

2 174 3 203

* MW Hlahla was appointed Chairman on 25 November 2011.

** MC Nkuhlu does not derive any fi nancial benefi t for services rendered to the IDC. His fees are paid directly to Nedbank Limited.

*** LI Bethlehem does not derive any fi nancial benefi t for services rendered to the IDC. Her fees are paid directly to Standard Bank Limited.

**** NE Zalk is employed by the dti and does not earn director’s fees for services rendered to the IDC.

***** JA Copelyn does not derive any fi nancial benefi t for services rendered to the IDC. His fees are paid directly to JCI Limited.



28. Directors’ emoluments (continued)Executive

2012

(Rand thousand)Emolu-ments

Long-termincentive

bonus*Performance

bonuses*

Contributionsto medical

aid, retirementbenefi ts,

insurance andother benefi ts Total

IDC 20 591 11 490 17 729 5 280 55 090

Mr MG Qhena 3 557 2 728 3 575 886 10 746

Mr GS Gouws 2 404 1 578 2 143 743 6 868

Mr U Khumalo 1 765 1 174 1 651 588 5 178

Mr G van Wyk 1 739 1 162 1 517 595 5 013

Ms K Schumann 1 534 956 1 376 513 4 379

Mr SAU Meer 1 768 990 1 307 207 4 272

Mr LP Mondi 1 435 927 1 164 474 4 000

Ms JM Modise 1 865 242 1 473 340 3 920

Ms NV Mokhesi 1 384 838 1 166 415 3 803

Mr AP Malinga 1 527 442 1 226 303 3 498

Mr P Makwane 1 613 453 1 131 216 3 413

Foskor 17 881 6 904 – 3 311 28 096

Mr AM Pitse 2 983 1 545 – 792 5 320

Mr JW Horn 2 252 948 – 94 3 294

Mr SMS Sibisi 1 782 988 – 355 3 125

Mr TJ Koekemoer 1 767 874 – 418 3 059

Mr K Cele 1 850 834 – 286 2 970

Ms XS Luthuli 1 835 811 – 304 2 950

Mr MP Mosweu 1 876 529 – 362 2 767

Mr G Skhosana 1 912 – – 455 2 367

Mr N Nkomzwayo 1 624 375 – 245 2 244

38 472 18 394 17 729 8 591 83 186

* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate objectives (targets). These objectives are approved by the Board at the beginning of each period. The amount paid is based on the corporate, team and individual’s performances.


Ann

ual fi

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28. Directors’ emoluments (continued)2011

(Rand thousand)Emolu-ments

Long-termincentive

bonus*Performance

bonuses*

Contributionsto medical

aid, retirementbenefi ts,

insurance andother benefi ts Total

IDC 17 503 7 548 13 131 5 200 43 382

Mr MG Qhena 3 330 1 976 2 661 828 8 795

Mr GS Gouws 2 209 1 102 1 739 880 5 930

Mr G van Wyk 1 598 818 1 245 671 4 332

Mr U Khumalo 1 587 806 1 364 531 4 288

Mr SAU Meer 1 641 675 1 170 272 3 758

Ms K Schumann 1 376 666 1 064 459 3 565

Mr LP Mondi 1 357 665 918 447 3 387

Ms JM Modise 1 681 – 1 210 382 3 273

Ms NV Mokhesi 1 283 596 862 434 3 175

Mr P Makwane 1 441 244 898 296 2 879

Foskor 16 279 8 009 13 569 4 997 42 854

Mr AM Pitse 2 748 1 830 2 867 731 8 176

Mr JW Horn 2 095 1 021 1 619 85 4 820

Mr G Skhosana 1 759 914 1 538 350 4 561

Mr MP Mosweu 1 740 472 1 535 358 4 105

Mr K Cele 1 694 884 1 475 281 4 334

Ms XS Luthuli 1 652 852 1 491 295 4 290

Mr SMS Sibisi 1 647 1 102 1 486 340 4 575

Mr TJ Koekemoer 1 632 934 1 558 380 4 504

Mr JWT Potgieter 1 312 – – 2 177 3 489

33 782 15 557 26 700 10 197 86 236

* Represents amounts payable to executive members for achieving certain objectives that are aligned to the corporate objectives (targets). These objectives are approved by the Board at the beginning of each period. The amount paid is based on the corporate, team and individual’s performances.




29. Taxation

Major components of the tax expense/(income)Current

Local income tax – current period 132 90 130 88

Local income tax – recognised in current tax for prior periods (6) 89 (5) 89

Dividend tax on companies 7 – – –

Foreign income tax or withholding tax – current period – 8 – 8

133 187 125 185

Deferred

Deferred tax – current year (26) 23 (96) (98)

Deferred tax – prior year – (4) – (4)

(26) 19 (96) (102)

107 206 29 83

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average eff ective tax rate:

South African normal tax rate 28.00% 28.00% 28.00% 28.00%

The normal rate of taxation for the year has been adjusted as a consequence of:

• Dividend income (30.00)% (18.00)% (29.00)% (46.00)%

• Capital gains and losses (7.00)% (3.00)% (11.00)% (1.00)%

• Provisions and impairments 9.00% 9.00% 20.00% 14.00%

• Other permanent diff erences 3.00% (9.00)% (7.00)% 11.00%

Effective tax rate 3.00% 7.00% 1.00% 6.00%


Ann

ual fi

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30. Financial and operating leasesFinance leases – Group as lesseeThe Group has leases classifi ed as fi nancial leases principally for property. Future minimum lease payments payable under fi nance leases, together with the present value of minimum lease payments, are as follows:

Land and buildings

• Due within one year 5 5 – –

• Due after one year but within fi ve years 16 17 – –

• Due after fi ve years 16 20 – –

Total minimum lease payments 37 42 – –

Amount representing fi nance charges (17) (20) – –

Present value of minimum lease payments 20 22 – –

Current portion 2 2 – –

Long-term portion 18 20 – –

20 22 – –

The fi nance lease is between Foskor (Pty) Ltd and uMhlathuze Water Board for an effl uent pipeline.

The lease liability is eff ectively secured, as the rights to the leased

asset revert to the lessor in the event of default. The lease is

over a 20-year period with 14 years remaining at 31 March 2012.

Foskor has sole use of the effl uent pipeline and pays for the

maintenance. The lease is at a fi xed rate of 14.4% per annum.

Operating leases – Group as lessee

Certain items of computer and offi ce equipment are leased by the Group.

Commitments for future minimum rentals payable under non-cancellable leases are as follows:

• Due within one year 6 5 3 3

• Due after one year but within fi ve years 6 7 3 6

12 12 6 9

The company leases network printers and scanners under one agreement, which terminates in 2013.




31. Cash (used in)/generated from operations Profi t before taxation 3 410 2 918 2 222 1 381

Income from equity accounted investments 2 (633) 6 7

Adjustments for:

Impairment of goodwill relating to associated entities (149) 388 – –

Impairment of goodwill relating to subsidiaries – 202 – –

Amortisation of intangibles assets 1 – – –

Depreciation of property, plant and equipment 308 273 21 25

Loss/(profi t) on sale of assets 3 (15) – –

(Reversal)/impairment of property, plant and equipment (70) 32 – 12

Net capital gains (878) (36) (878) (353)

Interest received (1 562) (1 318) (1 572) (1 329)

Dividends received (3 273) (2 271) (2 663) (1 895)

Finance costs 446 346 347 315

Project feasibility expenses 31 (3) 31 149

Specifi c and portfolio impairments 1 048 671 1 616 1 026

Fair value adjustment on share-based payment 9 – 70 –

Changes in working capital:

Inventories (609) (375) 1 9

Trade and other receivables (360) (34) (51) (4)

Derivative assets 3 (6) (2) (1)

Trade and other payables 742 324 154 (294)

Movements in retirement benefi t assets and liabilities 51 22 23 12

Movements in provisions 7 (12) (5) (1)

Decrease in non-current assets held-for-sale – 1 – –

(840) 474 (680) (941)

32. Taxation paid

Net owing at the beginning of the year 37 460 (16) 450

Normal tax provided in income statement (refer to note 29) (133) (187) (125) (185)

Net owing at the end of the year (121) (37) (56) 16

(217) 236 (197) 281

33. Acquisition of subsidiaries

Property, plant and equipment – 59 – –

Other receivables – 2 – –

Cash and cash equivalents – 5 – –

Inventories – 16 – –

Other payables – (48) – –

Loans – (29) – –

Total purchase consideration – 5 – –

Less: Cash and cash equivalents acquired – (5) – –

Cash outflow on acquisition of shares – – – –


Ann

ual fi

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ents


34. Commitments

In respect of:

Undrawn fi nancing facilities approved 34 268 20 621 31 913 20 621

Undrawn guarantee facilities approved 1 947 1 182 1 947 1 182

Capital expenditure approved by subsidiaries 357 178 – –

• Contracted 357 168 – –

• Not contracted – 10 – –

Capital expenditure approved by equity-accounted investments 319 256 – –

• Contracted 94 109 – –

• Not contracted 225 147 – –

Total commitments 36 891 22 237 33 860 21 803

Less: Counter-guarantees obtained from partners in respect of fi nancing and guarantees to be provided to major projects (465) (86) (465) (86)

Commitments net of counter-guarantees 36 426 22 151 33 395 21 717

Commitments will be fi nanced by loans and internally generated funds.

35. Guarantees and counter-guaranteesGuarantees in respect of foreign loans taken up by wholly-owned subsidiaries 40 64

Guarantees issued in favour of third parties in respect of fi nance provided to industrialists 1 431 2 529 1 441 2 539

Total industrial fi nancing guarantees 1 431 2 529 1 481 2 603

Less: Counter-guarantees obtained from partners in respect of fi nancing and guarantees to be provided to major projects – (616) – (616)

1 431 1 913 1 481 1 987

Sundry guarantees issued by subsidiaries 436 403 – –

Guarantees issued by equity-accounted investments 59 40 – –

Guarantees net of counter-guarantees 1 926 2 356 1 481 1 987



36. ContingenciesContingent liabilities of subsidiaries

Foskor (Pty) LtdThe Group had mine rehabilitation guarantees amounting

to R365 million at year-end (refer above). In line with

the requirements set out by the Department of Mineral

Resources (DMR), this amount of R365 million (2010:

R365 million) was in place at 31 March 2011. These

guarantees and the agreement reached with the DMR were

based on the environmental rehabilitation and closure costs

assessment that was performed during the 2011 fi nancial

year. The assessments are performed on a three-year rolling

basis, with the next assessment due in 2013. Estimated

scheduled closure costs for the mine are R409 million.

For unscheduled or premature closure, the DMR, in

accordance with the Minerals and Petroleum Resources

Development Act, requires Foskor (Pty) Ltd to provide for

the liability of R486 million in the form of guarantees and

cash.

Prilla 2000 (Pty) LtdCotton contracts entered into with various cotton suppliers

are binding and could result in liabilities for the company if

they are cancelled or if they are not utilised for operational

purposes but instead realised for a price lower than their

cost.

Contingent liabilities of equity-accounted investments

Duferco (Pty) LtdABSA Bank has provided guarantees of R2 110 000 for the

Saldanha Bay Municipality, Transnet and Eskom accounts.

Hans Merensky Holdings (Pty) LtdLand claims against property held by the Group have

been gazetted in terms of the Restitution of Land Rights

Act, 1994. In the opinion of the directors, after taking

appropriate legal advice, the outcome of such actions

cannot be reliably predicted and measured at reporting

date and consequently no impairment charge has been

recognised. Until the land claim has become gazetted, no

assessment can be made of the possible impact of any such

claims. Gazetted land claims will have a fi nancial impact

if it is probable that there will be an outfl ow of economic

interest from the Hans Merensky Group. When the fi nancial

loss becomes probable and can be reliably measured, an

impairment charge will be recognised.

Hulamin LtdThe Department of Trade and Industry has raised a dispute

with the Hulamin Group relating to previous GEIS claims in

the amount of R5 162 000 (prior year: R4 794 000). A date for

a court hearing for the matter is still to be set.

Sahara Aluminium Works, a toll processor of the company’s

coated scrap, has claimed that there existed a long-term

constructive contract with Hulamin Ltd, formerly Hulett

Aluminium (Pty) Ltd, which would require a ten-year notice

period be given before this contract could be terminated.

Sahara has thus claimed R17.8 million from Hulamin, largely

in respect of the loss of profi ts that Sahara would have

earned over ten years, arising from the early termination of

the purported constructive contract. A liability has not been

raised for this amount as there is only a remote possibility

that Sahara will succeed in its claim.

A fi re in February 2002 at the S6 Cold Mill resulted in the

death of a contractor and injuries to his assistant. The wife

of the deceased and the injured assistant have lodged civil

claims amounting to R1.6 million plus interest. Judgement

was delivered in September 2009 in the matter between

Hulamin and the injured assistant and the court ruled in

favour of Hulamin and the case was dismissed with costs.

An application for leave to appeal was heard and granted

in March 2010. A liability of R3 million which was previously

raised for this matter was reversed in December 2009

following the favourable court ruling in September 2009.

Karsten Group Holdings (Pty) LtdThe company provided warranties in favour of Eskom and

Caltex Oil SA (Pty) Ltd:

• R1 005 220 in favour of Eskom

• R350 000 in favour of Caltex Oil SA (Pty) Ltd

The company has given the following suretyship to ABSA

Bank for related companies:

• Unlimited suretyship for Karsten Boerdery (Wes-Kaap) (Pty) Ltd

• Unlimited suretyship for Karsten Boerdery (Pty) Ltd

• Unlimited suretyship for Karsten SA Holdings (Pty) Ltd

• Unlimited suretyship for New Vision Fruit (Pty) Ltd

Karsten Boerdery (Pty) Ltd has provided a limited suretyship

of R6.8 million for Karsten Fruit Packers (Pty) Ltd.

New Vision Fruit provided warranty in favour of ABSA

Bank for: Perishable Products Export Contractors (Pty) Ltd;

National Ports Authority and SARS Customs.


Ann

ual fi

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ents

Mozal SARLThe contingent liability relates to a bank dispute guarantee

lodged for a dispute between Mozal and the Labour

Minister regarding the redundancy of 80 employees in

February 2009.

Imbani Platinum SPVGuarantees amounting to R14 298 631 have been provided

by a fi nancial institution in favour of the Department of

Minerals and Resources and Eskom.

The York Timber Organisation Ltd (York)Suretyship: York participates in the pooled banking facilities

granted by the FirstRand Bank Limited. As such, York has

provided unlimited suretyship in favour of the FirstRand

Bank Limited in respect of its obligations to the bank.

37. Retirement benefitsPension and provident schemesThe Group has pension and provident schemes covering

substantially all employees. All eligible employees are

members of either defi ned contribution or defi ned benefi t

schemes. These schemes are governed by the Pension

Funds Act, 1956, as amended. The assets of the schemes

under the control of trustees are held separately from those

of the Group.

The costs charged to profi t or loss represent contributions

payable to the scheme by the Group at rates specifi ed in

the rules of the scheme.

Defi ned contribution schemesEmployees and Group companies contribute to the

provident funds on a fi xed-contribution basis. No actuarial

valuation of these funds are required. Contributions,

including past-service costs, are charged to profi t or loss

when incurred.

Defi ned benefi t schemeA Group company and its employees contribute to a

defi ned benefi t pension fund. The pension fund is fi nal

salary fully funded. The assets of the fund are held in an

independent trustee-administered fund, administered in

terms of the Pension Funds Act, 1956, as amended.

The fund is valued every three years using the projected

unit credit method. The actuarial valuation for purposes of

IAS 19 was performed on 31 December 2011.

The fi gures below relate only to the Group.



The amounts recognised in the statement of financial position are as follows:


Present value of funded obligations 399 341

Fair value of plan assets (374) (336)

Present value of unfunded obligations 25 5

Liability recognised 25 5

Experience adjustments on plan liabilities 11 16

Experience adjustments on plan assets (2) 6

The movement in the defined benefit obligation:

Opening balance 341 320

Current – service cost 46 1

Interest – cost 30 32

Actuarial losses 11 16

Benefi t paid (29) (28)

Closing balance 399 341

Movement in asset plan:

Fair value of plan assets at the beginning of the year 336 328

Expected return on asset 68 29

Actuarial (loss)/gain recognised during the year (2) 6

Contributions paid into plan 1 1

Benefi ts paid (29) (28)

Fair value of plan assets at the end of the year 374 336


Ann

ual fi

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ents


The amounts recognised in profit or loss are as follows:

Current – service cost 46 1

Interest cost 30 32

Expected return on assets (68) (29)

Net actuarial loss recognised during the year 10 22

Total included in operating expenses 18 26

The actual return on plan assets was:

Expected return on plan assets 68 29

Actuarial (losses)/gains on plan assets (2) 6

Actual return on plan assets 66 35

Plan assets are comprised as follows:

Equity instruments (%) 46 35

Cash (%) 20 31

Debt instruments (%) 13 11

Other (%) 21 23

100 100

The principal actuarial assumptions for accounting purposes were:

Discount rate (%) 8.75 8.50

Expected return on plan assets (%) 8.75 8.50

Future salary increases (%) 7.50 6.75

Future pension increases (%) 5.53 4.89

Normal retirement age 60 60

The sensitivity of the overall pension liability to changes in the weighted principal assumptions is:

Impact on overall liability 2012 2011

Infl ation rate (increase of 1%) 8% increase 8% increase

Infl ation rate (decrease of 1%) 6% decrease 7% decrease

The expected contributions to the post-employment pension scheme for the year ending 31 March 2013 are R0.2 million (2012: R0.4 million).

Post-retirement medical benefi tsSome Group companies have obligations to provide post-retirement medical benefi ts to their pensioners.

The accumulated post-retirement medical aid obligation and the annual cost of those benefi ts were determined by independent

actuaries. Any surplus or shortfall between the actuarially determined liability and the aggregate amounts provided is charged to

profi t or loss.




The amounts recognised in the statement of financial position are as follows:

Present value of unfunded obligation:

Discovery Health members 265 214 135 112

Movement in the liability recognised in the statement of financial position:

At the beginning of the year 214 192 112 100

Contributions paid (11) (11) (6) (5)

Current – service costs 2 2 2 2

Interest cost 44 15 10 10

Non-current medical obligation classifi ed as held-for-sale – 1 – –

Defi cit 16 15 17 5


The principal actuarial assumptions used for accounting purposes were:

Discount rate (%) 9.00 9.00 9.00 9.00

General infl ation rate (%) 6.25 5.25 6.25 5.00

Medical infl ation rate (%) 7.25 7.25 7.25 7.25

Normal retirement age 58/60/64 58/60/64 58/60/64 58/60/64

Group Company

2008 200 133

2009 206 139

2010 192 100

2011 214 112

2012 265 135

Change in past-service

liability

Change in service cost

plus asset

Infl ation rate (increase of 1%) 14.3% increase 15.5% increase

Infl ation rate (decrease of 1%) 11.7% decrease 12.5% decrease

The expected contributions to post-employment medical plans for the year ended 31 March 2012 are R11.1 million (2011: R3.4 million).


Ann

ual fi

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cial

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ents

38. Related parties

Ultimate holding company:Holding company:

Economic Department of DevelopmentIndustrial Development Corporation

(Rand million) Director Company

Financing approved

Financing balance Interest/

funding rate

Type of fi nancing/ repayment

terms Director’s interestYear of

approval2012 2011

CURRENT DIRECTORS WITH INTERESTS IN RELATED PARTIESMr SK Mapetla Afrika

Biopharma Investment

18 18 18 7% Working capital facility

Mr S Mapetla owns 41% of Afrika Biopharma

Investment

2010

Ms MW Hlahla Clidet 688 T/A Praxley

Consortium Five (Pty) Ltd

14 14 14 RATIRR of 8% Redeemable preference

shares

14% in Praxley Consortium Five (Pty) Ltd

2007

CURRENT DIRECTORS WHO NO LONGER HAVE INTERESTS IN RELATED PARTIESMs MW Hlahla On Digital

Media (Pty) Ltd100 100 N/A Equity 5.56% holding in Lereko

Investments (Pty) Ltd, which has a 6.67% stake in

First Aone which in turn has a 10% stake in On

Digital Media (Pty) Ltd. The director’s eff ective stake in On Digital Media (Pty) Ltd, through Lereko, is 0.37%. Ms Hlahla resigned as a

shareholder from Lereko Investments August 2010

2008

Ms MW Hlahla First Aone Trade and

Investments 12 (Pty) Ltd

95 95 RATIRR of 12% plus 50%

upside

Redeemable preference

shares

2009

Ms LI Bethlehem

Hans Merensky Holdings (Pty) Ltd

100 73 N/A Equity Was a trustee of The Hans Merensky Foundation until

November 2010, the controlling body with a 57.4% interest in Hans

Merensky Holdings (Pty) Ltd. The IDC holds

the remaining 42.6% interest in Hans Merensky

Holdings (Pty) Ltd

1999



(Rand million) Director Company

Financing approved

Financing balance Interest/

funding rate

Type of fi nancing/ repayment

terms Director’s interestYear of

approval2012 2011

PREVIOUS DIRECTORS WITH INTERESTS IN RELATED PARTIESMs NN Nokwe Nexus

Connection (Pty) Ltd

151 146 146 N/A Equity Nexus Connection (Pty) Ltd’s existing

shareholding includes various Provincial

Consortia. Ms Nokwe, a non-executive IDC director

has an eff ective 0.333% shareholding in Nexus

through the Western Cape Provincial Consortium;

Prospects SA Investments 50 having a 5%

shareholding in Nexus Connection (Pty) Ltd

2006

Ms NN Nokwe Neotel (Pty) Ltd

600 – – Three-month JIBAR rate +

1.25%

Redeemed March 2009

Nexus has a 19% shareholding in Neotel

(Pty) Ltd

2006

100 99 86 Three-month JIBAR rate +

4.75%

Loan repayable after June 2013

2008

800 797 691 Three-month Loan repayable 2008 JIBAR rate +

6%after June 2013

366 366 293 Minimum of 8% of RATIRR

+ 50% of market value

Loan repayable after June 2019

2008

90 57 57 N/A Equity 2008

Mr JR Barton Bell Equipment

Company SA (Pty) Ltd

595 303 99 10% Working capital facility

Mr Barton is a director of Bell Equipment Company

SA (Pty) Ltd. Mr Barton resigned as a director of

IDC on 25 November 2011

2009

National sphere of government (Rand million) The Land and Agricultural Development Bank of SA Ltd

100 34 – 0% Loan: Repayable on 31 March

2022

2011

The Land & Agricultural Development Bank of SA Ltd

50 – – 0% Loan: Repayable on 31 March

2022

2012


Ann

ual fi

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Non-fi nancing transactions Rendering of services

Transnet Ltd 732 602 – –

South African Airways (Pty) Ltd 9 10 8 10

Telkom Ltd 7 6 4 4

National Ports Authority 23 21 – –

SA Post Offi ce Ltd 1 1 1 1

772 640 13 15

Non-financing transactions – Purchase of goods

Eskom Ltd 306 204 – –

39. Other comprehensive income

Components of other comprehensive income Group – 2012 Figures in Rand million Gross Tax

Shareof other

compre-hensive

income ofassociates Net

Exchange differences on translating foreign operations

Exchange diff erences arising during the year 340 – – 340

Available-for-sale financial assets adjustments

Losses arising during the year (214) (2 317) (1 902) (4 433)

Movements on revaluation Losses on property revaluation (62) – – (62)

Total 64 (2 317) (1 902) (4 155)

Components of other comprehensive incomeGroup – 2011 Figures in Rand million Gross Tax

Shareof other

compre-hensive


Exchange diff erences on translating foreign operations

Exchange diff erences arising during the year (242) – – (242)

Available-for-sale fi nancial assets adjustments

Gains/(losses) arising during the year 12 244 (614) (317) 11 313

Movements on revaluation

Losses on property revaluation (185) – – (185)

Total 11 817 (614) (317) 10 886



Components of other comprehensive income Company – 2012 Figures in Rand million Gross Tax

Shareof other

compre-hensive



Gains/(losses) arising during the year 543 (1 865) (38) (1 360)

Movements on revaluation Gains on property revaluation 9 – – 9

Total 552 (1 865) (38) (1 351)

Components of other comprehensive income Company – 2011 Gross Tax

Shareof other

compre-hensive



Gains/(losses) arising during the year 11 639 (1 113) 22 10 548

Movements on revaluation

Losses arising during the year (12) – – (12)

Total 11 627 (1 113) 22 10 536

40. Auditors’ remuneration

Fees 13 14 8 8

41. Share-based paymentsOn 7 July 2009 Foskor and the IDC, as the controlling shareholder of Foskor, entered into a BEE transaction. In terms of the transaction the IDC legally sold a 12% interest in Foskor to Strategic Business Partners and Special Black Groups (collectively, the BEE Partners), a 6% interest in Foskor to the Foskor Employee Share Option Plan (ESOP), and a 9% interest in Foskor to communities (the Community Trust) as part of Foskor’s eff orts to achieve the objectives set out in the dti’s Broad-Based Black Economic Empowerment Codes of Good Practice (the dti Codes) and also to attain broad-based employee participation. The BEE Partners, employee benefi ciaries of the ESOP and benefi ciaries of the Community Trust are collectively referred to as the BEE Participants.

The transaction is recognised as a share-based payment in terms of the requirements of IFRS 2: Share-based Payment, and consequently the 26% interest in Foskor sold to the BEE Participants has not been derecognised for accounting purposes in the company or Group. While some rewards have been transferred to the BEE Participants, the IDC remains substantially exposed to the risks of the Foskor shares through its funding of the transaction. The transaction will continue to be accounted for in this manner until such time as the preference shares have been redeemed by BEE Participants. The value of the share-based payment is determined using an appropriate valuation technique.


Ann

ual fi

nan

cial

sta

tem

ents


Equity-settled share-based payment reserve At the beginning of the year 304 304 – –Granted – – – –

At the end of the year 304 304 – –

Cash-settled share-based payment liability At the beginning of the year 48 23 374 374Cash-settled share-based payment expense 9 25 – –Fair value adjustment through profi t or loss – – (70) –

At the end of the year 57 48 304 374

Equity-settled reserve: Weighted average fair value assumptionsThe fair value of services received in return for equity instruments granted is measured by reference to the fair value of the equity instruments granted. The estimate of the fair value of the equity instruments granted is measured based on the Monte Carlo Option Pricing model.

The following weighted average assumptions were used in the share pricing models during the year:

Grant date 31 Dec 2009 31 Dec 2009 Initial company value – exercise price (R’m) 3 500 3 500 Average share price at grant date (R) 382.19 382.19 Annualised expected volatility (%) 43.00 43.00 Risk-free interest rate (%) 8.54 8.54 Dividend yield (%) 2.25 2.25 Strike price (R) 655.68 655.68

Cash-settled share-based payment liability: Weighted average fair value assumptionsThe following weighted average assumptions were used in the share pricing models during the year:

Exercise price (R’m) 3 500 3 500 3 500 3 500Average share price at grant date (R) 382.19 382.19 382.19 382.19Annualised expected volatility (%) 41.69 43.51 37.06 43.19Risk-free interest rate (%) 7.43 8.75 7.11 8.54Dividend yield (%) 2.51 2.64 2.17 2.25Strike price (R) 566.51 498.27 504.19 617.45

The volatility indicator used in the calculation was based on the market prices of globally listed proxy companies that are in the same industry as Foskor and the changes in their share prices over the last 10 years was used to determine the volatility in their share prices.

The transaction fees incurred in the last fi nancial year of R8.6 million mainly comprise the abort fees incurred in respect of the cancellation of the Foskor listing.


Acronyms

AADFI – Association of African Development Finance Institutions

ADS – Agency Development and Support Department

AIDS – Acquired Immune Defi ciency Syndrome

ARV – Anti-Retro Virals

ACT – Artemesinin Combination Therapy

B-BBEE – Broad-Based Black Economic Empowerment

BIC – Board Investment Committee

BRICS – Brazil, Russia, India, China and South Africa

BSP – Business Support Programme

CDM – Clean Development Mechanism

CEO – Chief Executive Offi cer

COSATU – Congress of South African Trade Unions

COSO – Committee of Sponsoring Organisations of the Treadway Commission

CSI – Corporate Social Investment

CTCIP – Clothing and Textile Competitiveness Improvement Programme

CTFL – Clothing, Textile, Footwear and Leather Scheme

DFD – Development Funds Department

DFI – Development fi nance institution

DoE – Department of Energy

DPPP – Designated Preferential Procurement Plan

the dti – Department of Trade and Industry

DEFRA – Department for Environment, Food and Rural Aff airs (UK)

EDD – Economic Development Department

EHS – Environmental Health and Safety Department

ERM – Enterprise Risk Management

ESCO – Energy servicing companies

EV – Electric vehicle

EWP – Employee wellness programme

GBCSA – Green Building Council of South Africa

GDP – Gross domestic product

GEC – Governance and Ethics Committee

GEEF – Green Energy Effi ciency Fund

GRI – Global Reporting Initiative

HCNC – Human Capital and Nominations Committee

HIPO – High Potential Staff

HIV – Human Immuno Defi ciency Virus

IA – Internal Audit

ICT – Information and communication technologies

IDC – Industrial Development Corporation

IFAC – International Federation of Accountants

IMC – Investment Monitoring Committees

IPAP – Industrial Policy Action Plan

IRP – Integrated Resource Plan

KfW – Kreditanstalt für Wiederaufbau

KZN – KwaZulu-Natal

LED – Local Economic Development

LPSWH – Low Pressure Solar Water Heaters

MCC – Medicines Control Council

MHCV – Medium and heavy commercial vehicle

MOU – Memorandum of understanding

NGO – Non-governmental organisation

NGP – New Growth Path

NHI – National Health Insurance

NIPF – National Industrial Policy Framework

NTSS – National Tourism Sector Strategy

PFMA – Public Management Finance Act

PHC – Primary Health Care

PICC – Presidential Infrastructure Co-ordinating Commission

PICS – Pharmaceutical Inspection Co-operation Scheme

PIMD – Post Investment Monitoring Department

PPP – Public Private Partnerships

PRASA – Passenger Rail Agency of South Africa

PTIP – Photovoltaic Technology Intellectual Property

REPP – Renewable Energy Procurement Programme

RMD – Risk Management Department

SACTWU – South African Textile Workers Union

SADC – Southern African Development Community

SASSA – Solar Academy of sub-Saharan Africa

SBU – Strategic Business Units

SE – Social enterprise

SED – Socio-economic Development

sefa – Small Enterprise Finance Agency

SHIP – Strategic High Impact Projects

SME – Small and medium enterprises

SMME – Small medium and micro enterprises

SOC – State-owned companies

TES – Transformation and Entrepreneurial Scheme

TIPS – Trade and Industrial Policy Strategies

TRS – Thelo Rolling Stock

UNEP-FI – United Nations Environmental Programme

VCT – Voluntary Counselling and Testing

VER – Verifi ed Emission Reductions

WWF – World Wildlife Fund

W&R – Workout and Restructuring Department

Administration

For more information please visit our website www.idc.co.za/IR2012

DirectorsExecutiveMG QhenaGS Gouws (alt)

Non-executiveMW Hlahla (Chairman)LI BethlehemPM ButheleziJA CopelynBA DamesLL DhlaminiRM GodsellBA MabuzaSK MapetlaLR PitotSM RensburgZJ VaviNE Zalk

AuditorsKPMG (Johannesburg)SizweNtsalubaGobodo (Johannesburg)

Registered offi ceIDC19 Fredman DriveSandton 2146

PO Box 784055Sandton 2146

Telephone: +24 (11) 269 3000Fax: +27 (11) 269 3116

Website: www.idc.co.za/IR2012

Company SecretaryE Moeti

Registration number1940/014201/06

Contact usHead offi ce19 Fredman Drive, Sandown PO Box 784055, Sandton 2146, South Africa Telephone: +27 11 269 3000 | Fax: +27 269 3116Email: call [email protected] | Call Centre: 0860 693 888

Regional and satellite offi ces Eastern Cape: East London 1st Floor, Hammer Mill House, The Quarry Offi ce Park, Lukin Road, Berea, East London Tel: (043) 721 0733/4777 | Fax: (043) 721 0735

Eastern Cape: Port Elizabeth Southern Life Gardens, Block B (Ground), 70, 2nd Avenue, Newton Park, Port Elizabeth Tel: (041) 363 1640 | Fax: (041) 363 2349

Free State: Bloemfontein 1st Floor, PKF Building, 46, 1st Avenue, Westdene, Bloemfontein Tel: (051) 411 1450 | Fax: (051) 447 4895

KwaZulu-Natal: Durban Suite 2305, 23rd Floor, The Embassy Building, 199 Anton Lembede Street, Durban Tel: (031) 337 4455 | Fax: (031) 337 4790

KwaZulu-Natal: Pietermaritzburg Suite 101, First Floor, 161 Pietermaritz Street, Pietermaritzburg Tel: (033) 328 2563

Limpopo: Polokwane Suite 18, Biccard Offi ce Park, 43 Biccard Street Polokwane Tel: (015) 299 4080/4099 | Fax: (015) 295 4521

Limpopo: Groblersdal1st Robinson Street, Groblersdal Tel: (015) 299 4080/4099 | Fax: (015) 295 4521

Limpopo: ThohoyandouOld Mutual Building, Old Group Scheme Offi ces, Mphephu Road, Thohoyandou Tel: (015) 299 4080/4099 | Fax: (015) 295 4521

Limpopo: Tzaneen1st Floor, Prosperitas Building, 27 Peace Street, TzaneenTel: (015) 299 4080/4099 | Fax: (015) 295 4521

Mpumalanga: Mbombela Upper Level, Nelcity Building, Samora Machel and Paul Kruger Streets, Nelspruit Tel: (013) 752 7724 | Fax: (013) 752 8139

Mpumalanga: eMalahleni Hi-Tech House, 23 Botha Avenue corner Rhodes Street, Witbank Tel: (013) 752 7724 | Fax: (013) 752 8139

Mpumalanga: Secunda South Wing, Municipal Building, Lurgi Square, Secunda Tel: (013) 752 7724 | Fax: (013) 752 8139

Northern Cape: Kimberley Block D, Sanlam Business Complex, 13 Bishops Avenue, KimberleyTel: (053) 807 1050/1/2/3 | Fax: (053) 832 7396

Northern Cape: Upington Block 6, Lot 1070, Olyvenhoutsdrift Settlement, Louisvale Avenue, UpingtonTel: (053) 807 1050/1/2/3 | Fax: (053) 832 7396

North West: Rustenburg 1st Floor, Sunetco Building, 32B Heystek Street, Rustenburg Tel (014) 591 9660/1 | Fax: (014) 592 4485

North West: Brits Suite 108, Safari Centre, 28 van Velden Street, Brits Tel (012) 252 9599 | Fax: (086) 751 4743

North West: Klerksdorp Offi ce 35, West End Building, 51 Leask Street, Klerksdorp Tel (014) 591 9660/1 | Fax: (014) 592 4485

North West: Mafi keng 1B Mikro Plaza, corner First and Bessemer Streets, Industrial Sites, Mafi keng Tel (014) 591 9660/1 | Fax: (014) 592 4485

North West: Vryburg 83 Vry Street, Vryburg Tel (014) 591 9660/1 | Fax: (014) 592 4485

Western Cape: Cape Town Offi ce 2817, 28th Floor, ABSA Centre, 2 Riebeek Street, Cape Town Tel: (021) 421 4794 | Fax: (021) 419 3570

Western Cape: George Beacon Place, 125 Meade Street, GeorgeTel: (021) 421 4794 | Fax: (021) 419 3570

Printed on Magno Satin, produced in EMAS-accredited facilities ensuring all processes involved in production are of the highest environmental standards.

Cover printed on Text pages printed on

Printed on Triple Green: chlorine-free, made in South Africa with 60% sugar cane fi bre, using sustainable aff orestation methods. Triple Green is recyclable and biodegradable.

For more information please visit our website www.idc.co.za

IDC Integrated A

nnual Report 2012

For more information please visit our website www.idc.co.za

ADDITIONAL ONLINE INFORMATION

1. GROUP STRUCTURE

INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA LIMITED

POTENTIAL AND EXISTING CLIENTS / PROJECT PARTNERS

• Various media platforms including print, radio, TV and online (email, website)

• Meetings, interactions through sectoral / industry bodies

• Written correspondence such as information emailers and financial statements

• Annual and interim customer surveys

• Client site visits to showcase IDC’s impact

• Media briefings and press releases

• A clear and easy to understand application process

• Upfront communication of the application/information requirements

• Prompt responses to queries/requests/service issues

• Timeous and effective evaluation of funding applications

• Regular updates and communication on the application process

• Monitoring client performance

• Organisation-wide Customer Centricity training

• Customer service excellence employee recognition

• Streamlining application processes

• Dedicated email address to report service issues

• Secondments, participation in AGM’s, Board representivity

• Simplified and streamlined application process

• Increased focus on turnaround times

• Improved customer service

• Improved levels of communication

• Strengthened influencer role

• Pro-active industry development

• Opinion pieces by industry experts

• Customer expectations


• Socio-economic development

• Financial sustainability

EMPLOYEES • Combination of face-to-face, written, electronic and print communication.

• Employee engagement surveys

• CEO engagement sessions

• Divisional Executive feedback sessions

• Regular line manager meetings

• Transparent communication

• Information on IDC’s strategy and their link to the strategy

• Work/life balance and a conducive working environment

• Market-related remuneration and benefits

• Personal development and career advancement

• Making a difference

• Regular employee information sharing sessions

• Annual Star Awards to recognise top performers

• Market-related employee benefits, rewards and recognition

• Learning and development opportunities

• Leadership assessments

• Regular performance assessments

• Defined culture vision and transformation journey, focusing on customer-centricity

• Improved employee engagement

• Talent management through improved skills and capacitation

• Certification as a Top Employer

• Customer expectations

• Governance regulation and risk management

• Human Capital• Financial

sustainability

ECONOMIC DEVELOPMENT DEPARTMENT

• Ongoing and an annual strategic meeting with Minister of EDD and IDC Board

• Ongoing and Quarterly meetings with Director General and other officials

• Meetings between IDC employees and EDD officials

• Increased levels of industrial financing, especially to women, youth and Black Industrialists

• Job creation through beneficiation, regional development and labour-rich sectors of the economy

• Proactively identifying investment opportunities across value chains

• Assistance in policy research and coordination of projects

• Increased marketing towards women, youth and Black Industrialists through CEO regional road shows and Youth conference

• Funding for local suppliers to the government infrastructure programme

• Collaboration with government on its Strategic Integrated Projects (SIP 5 & 8).

• Contributing to the formulation and implementation of policies

• Pro-actively identifying funding opportunities

• Increased levels of industrial financing

• Increased impact on development outcomes

• Balancing pro-active funding, whilst keeping funding competitive

• Managing the IDC’s balance sheet for responsible lending

• Improved understanding of IDC’s mandate and subsequent impact




• Partners

2. STAKEHOLDER ENGAGEMENTStakeholder How we

engage with them

What matters to them

How we respond to

matters

Impact of our actions

Material matters being

addressed

NATIONAL, PROVINCIAL & LOCAL GOVERNMENT

• Meetings with relevant portfolio and select committees

• Meetings between IDC employees and government officials

• Interviews with industry experts

• Development of rural areas and townships

• Broad-based black economic empowerment

• Opportunities for women, youth and Black Industrialists

• Development of SMMEs

• Assistance with projects related to industrial development

• Pro-actively identifying projects in poor provinces and townships

• Expansionary Black Economic Empowerment (BEE)

• Skills development initiatives for youth and women co-operatives

• Leveraging relationships with provincial, local and rural development bodies

• Local economic and rural development

• Increased job creation

• Expanding industrialisation to less-industrialised regions

• Improved accuracy of reporting on IDC

• Socio economic development


• Partners• Financial

sustainability

COMMERCIAL BANKS, DFIS & RATING AGENCIES

• Due-diligences• Annual ratings

review• Interviews with

industry experts

• Good governance• Financial

sustainability and liquidity

• Satisfactory levels of debt

• Viable strategy

• Compliance to systems and procedures

• Prudent management of IDC finances

• Instilling a culture of governance and ethics among employees

• Transparent presentation of financial results

• Financial sustainability, enabling IDC to honour its financial commitments

• Strong governance structures

• Governance regulation and risk management


• Partners

BROADER COMMUNITY IMPACTED BY IDC-FUNDED PROJECTS

• Meetings with community leaders and traditional authorities

• Local Economic Development Forums

• Meetings with the Department of Rural Development and Land Reform

• Various media platforms, segmented for specific target audiences

• Sustainable socio-economic development

• Responsible utilisation of community land and other assets

• Community participation

• Assistance in forming, registering and managing community trusts and cooperatives

• Corporate Social Investment initiatives

• Empowering local people

• Transformation• Factual and

transparent information

• Timeous feedback

• Undertaking LED initiatives

• Appointment of specialists and consultants

• Establishing and registering community trusts and providing relevant training

• Compiling socio-economic needs assessments

• Community engagements

• Showcasing IDC’s impact through client case studies on regional and national media platforms.

• Job creation• Township

development• Productive

utilisation of community land and other assets

• Improved skills and increased community participation

• Successful CSI initiatives

• Empowered local people

• Progress towards transformation of the rural economy

• Enhanced reputation

• Improved understanding of IDC’s mandate and impact



• Partners• Governance,

regulation and risk management


Stakeholder How we engage with

them

What matters to them

How we respond to

matters

Impact of our actions

Material matters being

addressed


3. BOARD AND EXECUTIVE MANAGEMENT DIRECTORSHIPS

Director Significant Directorships

BA MABUZA (54)Chairperson of the Board(Non-Executive Director)

• Afgri Operations Limited• Absa Financial Services• Africa Business News (Pty) Ltd• Tsogo Sun Holdings

AT KRIEL (55)(Non-Executive Director)

• South African Clothing and Textile Workers’ Union (General Secretary)

BA DAMES (52)(Non-Executive Director)

• African Rainbow Energy & Power (Pty) Ltd (CEO)• Nedbank Limited• Nedbank Group Limited

NP MNXASANA (61)(Non-Executive Director)

• Nedbank Limited• Nedbank Group Limited• JSE Limited• ArcelorMittal South Africa Limited• Barloworld Limited

M MORE (37)(Non-Executive Director)

• Public Investment Corporation SOC Limited (Chief Financial Officer)

• Independent Regulatory Board for Auditors

PM MTHETHWA (54)(Non- Executive Director)

• The National Empowerment Fund (CEO)• Group Five Limited

NE ZALK (49)(Non-Executive Director)

ND ORLEYN (62)(Non-Executive Director)

• Peotona Group Holdings (Pty) Ltd (Executive Director)• Toyota SA (Pty) Limited• Toyota SA Financial Services Limited• Impala Platinum Holdings Limited• Reunert Limited• Ceramic Industries (Pty) Ltd• Lafarge Industries SA (Pty) Ltd• BP SA (Pty) Ltd

LI BETHLEHEM (50)(Non- Executive Director)

• City Power (Pty) Ltd (Chairperson of the Board)• HCI Sun Energy (Pty) Ltd• HCI Propco (Pty) Ltd• Sedibelo Platinum Mines Limited

SM MAGWENTSHU-RENSBURG (58)(Non-Executive Director)

• Rensiza Business Partners (Managing Director)• Merseta Finance and Grants Committee• Ministerial Advisory Committee on SME

RM GODSELL (65)(Non-Executive Director)

• Polymetal International PIC (Chairman of the Board)

4. CARBON FOOTPRINTImproving climate performance has been an integral part of the IDC’s climate change mainstream strategy. This critical bold step has been demonstrated in the past by tracking and monitoring of its climate related assets in terms of GHG emissions disclosure. The intention being to commit to climate change, promote and embrace investment lending in projects that promotes the transition to low carbon economy, account for climate change actions, support the government emission reduction target and demonstrates corporate environmental leadership.

This past financial year ending March 2018, the IDCs’ GHG emissions inventory has remained marginally stable. However, its consolidation based on financial approach, the emissions increase to 1 445 653 tCO2e. These emissions exceed 0.1Mt CO2e threshold limit prescribed in the Air Quality Act of 2004 as amended. Companies exceeding such threshold limit are expected to annually report on their carbon management plan. The individual material business partners showed GHG emissions below 0.1 Mt CO2e. It is thought that such increase in emissions may be attributable to energy intensive processes or inefficient processing technology.

The IDC alone showed a GHG inventory of 6 503 tCO2e, a marginal increase of 0.8 % compared to the recalculated baseline of a 6 450 tCO2e reported in the previous FY ending March 2013/14. This translated into associated emission intensity of 7.66. Such increase has been observed to be associated aircon gas (R22 Gas) which appear to have increased substantially from 165 tCO2e to 215 tCO2e due to frequent maintenances. The consumption of R22, though very small, its contribution is high (GWP 1810 times higher than CO2).Segmentation of the total carbon footprint estimate reveals that scope 1 emissions increased from 3 % to 16 % on addition of the emission data from subsidiaries (Fig 1). While scope 2 emissions increased from 56 % to 84 % on addition of emission data from

subsidiaries. Scope 3 emission data has been excluded from the discussion due to its complexity in nature and various challenges in data collection by subsidiaries. However, the scope 3 emission contribution is 41 %.The IDC continuously monitors the implementation of its carbon management strategy to ensure that all material subsidiaries are transparent in their carbon footprint disclosure and voluntary commit to reduction.

Table 1: IDC Energy intensity

The IDCs energy consumption amount to less than 1 % of the total energy contribution by material business partners. The consumption of energy (GJ) by material business partners amount to 4 144 703 GJ. Scaw Metal showed the highest energy consumption of 52 % translating into an intensity of 5, typical of metal recycling operations. Whilst Foskor energy consumption of 42 % at an intensity of 1.0 . This energy consumption efficiency reflects the nature of the individual operation in which the energy consumption drives the production (see table 1).

Figure 1: Changes in the GHG emissions of IDC on addition of Emissions from Subsidiaries

Table 2: GHG emissions data for period 1st April 2017 - 31st March 2018

STAFF COMMUTE

WATER

2013/14 2016/17 2017/18

68 75 84

10 254 9 856 11 019

5 5 5

6 043 5 339 6 145

9 59 24

421 601 194 215 232 258

20 16 18

98 165 215

1 383 435 1 032 086 1 213 396

13 251 251

(230) 0 0

1 805 036 1 226 301 1 445 653

35 20 27

2 0 35

12.38 12.00 13.00

2 343 1 833 2 088

1 280 1 954 1 975

55 31 45

0 0.02

7.79 6.64 7.66

174 127 1 833

407 299 358

0.29 0.22 0.26

6450 5638 6503

Baseline Recalculated Update Projection

Base year

FLEET CARS

TOTAL IDC (SCOPE 1, 2 & 3)

NEWSPAPER

ELECTRICITY

GENERATOR FUEL

SCOPE 1 (IDC & BP**)

STATIONARY

AIRCON GAS (R22)

SCOPE 2 (IDC & BP)

MIXED WASTE

JET FUEL

TOTAL SCOPE 1, 2 (IDC & BP)

CAR RENTALS

REFRIGERATION GAS (R134A)*

EMIS INT (IDC SCOPE 1, 2 & 3)

BUSINESS AIR TRAVEL

REFRIGERANT (410)*

EMIS INT (IDC SCOPE 1, 2)

BUSINESS MILEAGE CLAIM

SUBTOTAL (SCOPE 1)

EMIS PER M2 (IDC ONLY)

SUBTOTAL (SCOPE 1&2)

Verified Unverified Unverified

SCOPE 1

SUBTOTAL 2 (SCOPE 3)

SCOPE 3

SCOPE 2

3804 4217 4516

Indicator weighting Target Actual % Score Total scoreBEE

elements Weighting Indicators

2.00 50.00% 75.00% 2.00

1.00 25.00% 50.00% 1.00

2.00 50.00% 100.00% 2.00

1.00 25.00% 0.00% 0.00

2.00 60.00% 72.73% 2.00

2.00 60.00% 50.72% 1.69 16.69

1.00 30.00% 28.44% 0.95

2.00 75.00% 62.54% 1.67

1.00 38.00% 22.39% 0.59

2.00 88.00% 78.05% 1.77

1.00 44.00% 41.87% 0.95

2.00 2.00% 1.07% 1.07

1.00 30.00% 36.36% 1.00

Management control 20

Skills Development 25

Enterprise and Supplier Development

50

Exercisable Voting Rights of Black Board MembersExercisable Voting Rights of Black Women Board Members

Black Executive Directors

Black Women Executive Directors

Black Other Executive Management

Black Senior Management

Black Women in Senior Management

Black Middle Management

Black Female Middle Management

Black Junior Management

Black Female Junior Management

Black Disabled Employees

Black Female Other Executive Management

BROAD-BASED BLACK ECONOMIC EMPOWERMENT RATINGIDC B-BBEE Scorecard

9.00 6.00% 4.18% 6.27

5.00 80.00% 56.80% 3.55

4.00 0.30% 0.02% 0.25

4.00 15.00% 3.56% 0.95

6.00 2.50% 2.27% 5.44 22.40

5.00 15.00% 2.06% 0.69

6.00 2.50% 2.27% 5.44

11.00 40.00% 15.80% 4.35

5.00 100.00% 100.00% 5.00

5.00 12.00% 12.61% 5.00 36.53

2.00 2.00% 0.00% 0.00

15.00 2.00% 63.85% 15.00

5.00 1.00% 2.71% 5.00

Skills Development Expenditure in the Learning Matrix for Black People

B-BBEE Procurement Spend from all Empowering Suppliers

Skills Development Expenditure in the Learning Matrix for Black Disabled People

B-BBEE Procurement Spend from all Empowering Suppliers that are Qualifying Small Enterprises

Number of black people participating in learnerships, Apprenticeships or Internships

B-BBEE Procurement Spend from all Empowering Suppliers that are Exempt Micro-Enterprises

Number of unemployed black people participating in learnerships, Apprenticeships or Internships

B-BBEE Procurement Spend from all Empowering Suppliers that are at least 51% black owned

Bonus Points: Number of Black People absorbed by the Measured and Industry Entity at the end of the Learnership programme

B-BBEE Procurement Spend from all Empowering Suppliers that are at least 30% black women owned

Bonus Points: B-BBEE Procurement Spend from Designated Group Suppliers that are at least 51% Black Owned

Annual value of all Supplier Development Contributions

Annual value of Enterprise Development Contributions and Sector Specific Programmes

1.00 Yes Yes 1.00

1.00 Yes Yes 1.00

5.00 1.00% 2.65% 5.00 5.00

Bonus Point: Graduation of one or more Enterprise Development beneficiaries to graduate to Supplier Development Level

Bonus Point: Creating one or more jobs directly as a result of Supplier Development & Enterprise Development

Average annual value of all Socio-Economic Development Contributions

Socio-Economic Development

5

80.62Total

FINAL SCORE 80.62

APPLICABLE DENOMINATOR 100.00

RECOGNITION LEVEL Level Four Contributor

B-BBEE STATUS LEVEL Level Four Contributor

Measurement options

5. CORPORATE SOCIAL INVESTMENT

Education and Skills Development

Higher Education

Employee Volunteer and Giving

I Do Care

Adopt-a-School Foundation National

Vhembe TVET College Limpopo

Central Johannesburg College Gauteng

Stop Hunger Now - Sandton Convention Centre Gauteng

Ramakrishna Centre of South Africa Kwazulu-Natal

S.A.M.E Foundation - Mandela Day Gauteng

Siyaphambili Orphan Village Western Cape

Sterkfontein Hospital - Mandela Day Gauteng

CellC - Take a Girl Child to work Gauteng

Sathya Sai International Organisation of South Africa Gauteng

Casual Day Gauteng

Mercy Shelter for Homeless Gauteng

Kids Haven Gauteng

Rotarus Home for Senior Citizens - Mandela Day North West

Esandleni Somusa Matsulu Centre - Mandela Day Mpumalanga

Maluti TVET College Free State

Stop Hunger Now - Cape Town Mandela Day Cape town

Kidz Care Trust Free State

Tshedisanang Day Care Centre for Disabled - Mandela Day Free State

Uthando Children’s Drop in Centre - Mandela Day Mpumalanga

Stop Hunger Now - World Hunger Month Gauteng

The Rivers Foundation Gauteng

Habitat for Humanity - Mandela Day Gauteng

Impophomo Rushing Waters Gauteng

Mamadila Community Development - Mandela Day Limpopo

Targeting Talent Programme: University of Witwatersrand National

National Education Collaboration Trust National

Beneficiary/Project Name Beneficiary/Project NameLocation Location


Strategic Special Interventions Entrepreneurship Development

Reakgona Disability Centre - University of Limpopo Trust Limpopo

Pneuma Academy of Excellence Gauteng

SheEO SleepOut Gauteng Kusile Mzantsi Community Development Eastern Cape

Young Voice Academy Gauteng

IDC Gallery - Art Market Gauteng TML Foundation Free State

Y-BECA Youth Entrepreneurship Gauteng

Amahlubi Chairman’s Foundation North West Kakamas - Emmanual House Northern cape

Rashid Cassim Sports Kits Kwazulu-Natal

Traditional HIV and Aids Home Based Care North West

Buhle Farmers Academy - Graduation National

Thanda Community Project Kwazulu-Natal

Rivoni School for the Blind Limpopo

Empilisweni Centre Eastern cape

Sonke Gender Justice National

2017 Top Learner Awards National

New Brighton SDA Primary School Eastern CapeFood and Trees for Africa Mpumalanga & Limpopo

IDC Gallery - Curaror GautengMayine Imvula Cooperative Eastern Cape

Knowledge Hub Youth Empowerment Gauteng

Sinakho Skills Development Centre Western Cape

Beneficiary/Project Name Beneficiary/Project NameLocation Location

6. HUMAN CAPITAL

Top management (E band)

Senior management (Heads & champions)

Professional qualified & mid-management (M band)

Skilled technical (P band)

Semi-skilled & discretionary decision-making (A band)

Unskilled & defined decision-making (S band)

TOTAL PERMANENT

Actual March 2018Target 2018




Actual March 2018

Target 2018



OCCUPATIONAL LEVELS

Afr

ican

Afr

ican

Mal

e

Indi

an

Indi

an

Whi

te

Whi

te

TOTA

L

Col

oure

d

Col

oure

d

Fem

ale

4 0 1 3 4 0 0 0 0 0 12

17 1 1 3 0 0 6013 3 4 18

82 12 20 34 45 4 12 13 6 4 232

4 0 1 3 4 0 0 0 0 0 12

18 1 1 3 1 0 6011 3 4 19

96 12 19 38 71 9 10 14 7 5 281

129 19 10 21 128 18 22 25 8 3 383

34 0 0 2 128 15 5 19 0 2 205

37 5 0 1 121 15 5 23 0 2 209

8 0 0 0 2 0 0 0 0 0 10

10 0 0 0 3 0 0 0 0 0 13

249 27 32 71 321 39 34 55 13 8 849

287 39 34 82 345 43 38 65 15 10 958

108 12 7 14 125 19 16 20 7 2 330

MALE FEMALEFOREIGN NATIONALS

Eastern Cape

Employees as at 1 April

Number of employees trained

13 11

839 848 825

375 708 673

Mpumalanga

Lost through retirement

Black employees as a % of employees trained

7 5

10 5 3

74 86 83

KwaZulu-Natal

Lost through resignation

Training expenditure as a % of total staff costs

10 10

52 51 47

1 2 2

Northern Cape

Lost through ill-health

8 7

0 0 0

Free State

Added through recruitment

Staff costs (R million)

5 5

79 54 76

1 031 998 1 011

North West

Lost through dismissal

% of female employees trained

7 8

4 1 0

56 56 52

Limpopo

Lost through death

Average cost of training per employee (R)

7 6

2 3 3

13 100 10 000 11 513

Western Cape

Lost through contract expiry

Lost through other reasons (I.e. - subsidiary deployment)

9 7

0 1 0

1 2 0

Total

Total employees at end of period 849 839 848

Regional office

Staff actuals

Indicator

2018 2017

2018 2017 2016

2018 2017 2016

Staff numbers per region, excluding head office employees

Staff movement for the period 2016 to 2018

Comparative summary of investment in staff training

66 59

New employees younger than 29

New employees over the age of 50

New employees between 30 and 50

Permanent employees younger than 29

Permanent employees between 30 and 50

Permanent employees over the age of 50

Overall staff turnover

Employee turnover between 30 and 50

Turnover of male employees

Turnover in specialist/expertise, management and executive roles

Turnover of female employees

Employee turnover over the age of 50

Employee turnover younger than 29

Female new employees

New employees in provincial offices

New employees from designated groups

Staff actuals 2018 2017 2016

Talent attraction and retention rates

32.8 33.3 30.3

2.8 0 2.6

64.4 66.7 6.7

9.4 9.6 11.3

71.0 71.4 71.8

19.6 19.0 16.9

8.1 7.5 5.6

8.4 8.8 8.0

8.7 8.9 7.6

7.6 6.7 7.7

7.5 6.2 5.2

8.0 2.0 3.7

5.0 8.1 1.0

53.8 51.9 44.7

11.8 5.5 11.8

96.2 96.3 90.8

7. INFORMATION TECHNOLOGY

Once again, the IT department received a clean annual external audit report for the 2018 financial year. The external auditors concluded that the IT environment at the IDC could be relied upon for financial reporting purposes. The clean audit was as a result of the department adhering to industry best practices and stringent IT governance process controls.

The provisioning of IT Security interventions and fourth industrial Revolution (4IR) digital technology solutions by the IT department to protect and enable the corporation’s business value chain is a priority. The rollout of improved end user cloud services such as 0ffice 365 and mobile video conferencing solutions has further enabled and improved customer centricity and expanded market/client reach.

The key IT strategic initiatives achieved during the year under review included:

• Successful disaster recovery testing of critical business systems; • Installation and rollout of new and improved audio visual and telephony technologies for improved business communication/ collaboration, service availability, accessibility and performance; • Further strengthening of detective, forensic, audit and preventative cyber security controls to protect the corporation against new and evolving security threats, such as unauthorized access to the corporation’s information assets, and • Improved business intelligence capability to improve organizational decision making.

The IT department continues to upgrade technological infrastructure and services at our Head and Regional offices to improve service presence, availability and unified communication (for voice and video).

STRATEGIC INITIATIVES

IT AND BUSINESS ALIGNMENT

8. PROCUREMENT

9. SPECIAL FUNDING SCHEMES

The IDC is committed to promoting economic growth through the advancement of preferential procurement and the promotion of local production. Spend with local suppliers refers to all discretionary procurement spend facilitated through the IDC Procurement department with suppliers of materials, products and services trading from premises which are physically located within the borders of South Africa.

IDC is a Level 4 BEE Contributor based on an independent review undertaken by a SANAS (South African National Accreditation System) accredited rating agency as assessed under the Amended Financial Sector Codes for B-BBEE that came into effect in December 2017. In the year under review, the Corporation spent more than 90% of its total discretionary procurement spend with locally-based suppliers. The introduction of the revised Preferential Procurement Regulations which came into effect in April 2017, now enables the IDC to channel its procurement spend to BEE compliant companies which resulted in the Corporation appointing Black Owned External Audit firms for the 2017/18 financial audit. In addition, the IDC approved a panel of mainly Black Owned marketing agencies to provide marketing services to the Corporation to promote its transformation objectives through the procurement function.

The IDC’s Supplier Development (SD) Program aims to accelerate sustainable development and to support small and emerging black-owned suppliers of the IDC. Beneficiaries of the SD Program were assisted with essential business support interventions which included business skills training, mentoring, coaching and the supply of essential business tools. To that end, the SD Program generally supported the creation of new job opportunities for the SD Beneficiary companies and also resulted in access to new business opportunities. During the year under review, the IDC added an SD Beneficiary to its program which is a Black youth owned company, and as a result of the IDC’s contribution and association with this firm, the company attained a new cleaning services contract resulting in more jobs being created. Through its commitment to Government’s national broad-based black economic empowerment (“B-BBEE”) and transformation goals, the IDC is playing an important role in supporting Government’s initiatives towards a sustainable economy and people who actively participate in it.

Fund size Financial instrument

Fund inception

Amount approved since inception

until 31 march 2018Fund Purpose

CROSS SECTORAL

INDUSTRY SECTOR SPECIFIC

R950M loan/equity 2013/01/04 R553mAssist youth owned companies that create jobs at a cost per job of less than or equal to R750 000 per job.

GRO-E YOUTH1

R50m loan/grants 2016/03/31 R4mAssist youth applicants with a wide-ranging set of non-financial support at pre-investment and post investment stages.

YOUTH PIPELINE DEVELOPMENT PROGRAM2

R5b loans 2017/03/31 R655mAssist companies that save or create jobs at a cost per job of less than or equal to R600 000 per job

UIF23

R165m loan/equity/quasi-equity 2012/04/01 R128mCommercialisation of innovative products.

processes and technologiesTECHNOLOGY VENTURE CAPITAL5

R200m loan/equity 2008/07/01 R113.2mSupport new afforestation and transformation projects in the Forestry sector

PRO-FORESTRY SCHEME8

R750m loans 2008/09/08 R714.9mTo fund local players to upgrade their P/E to become globally competitive

CLOTHING.TEXTILES.LEATHER AND FOOTWEAR SCHEME10

R250m loan/equity 2012/01/07 R286.2m

Facilitate increased competition. growth and development in agro-processing sector; through provision of finance to non-dominant players

AGRO-PROCESSING COMPETITIVENESS FUND9

R790 ($66.6m) loans 2012/06/27 R213m

Stimulate small scale Power Purchase Agreement based renewable energy and greenfield energy efficiency investments in commercial and industrial sectors.

AFD FUND7

R1.5b loans 2012/01/09 R1.9bTo assist manufacturers under SIC 3 to access more affordable working capital and plant and equipment facilities

MANUFACTURING COMPETITVENESS ENHANCEMENT PROGRAM

6

ca R750m (variable - exchange ratedependent)

loans 2015/11/23 R519mAssisting SMEs and MIDCAP companies to access loan financing for CAPEX. medium and long-term working capital

EIB SME MIDCAP FUND4

R6.59b R6.76bTo improve the overall competitiveness of the local Clothing. Textiles. Footwear. Leather and Leather goods manufacturing industries

CLOTHING AND TEXTILES COMPETIVENESS PROGRAMME (CTCP)

11

R931m grants 2009/01/04 R956mImprove product. processes and people on a cluster basis

COMPETITIVENESS IMPROVEMENT PROGRAMME (CIP)

11.A

R5.57b grants 2010/01/04 R5.8b

Funding provided to individual companies for plant and equipment upgrade as well as improvement of product. processes and people

PRODUCTION INCENTIVE PROGRAMME (PIP)11.B

R95m loan/quasi-equity 2017/07/07 R5.9m

To assist qualifying enterprises in the downstream steel sectors to improve their competitiveness. as well as companies in distress with bankable turnaround strategies in order to survive the current downturn.

DOWNSTREAM STEEL INDUSTRY COMPETITIVENESS FUND

13

R1.5bloan/grant/quasi-equity/equity

2018/03/31 0

To promote the development and enhancement of the Construction Industry and. in particular. transformation objectives in the Construction Industry. including promoting social infrastructure.

TIRISANO CONSTRUTION FUND14

R77.2m loan/equity 2014/06/18 R8.6m

The EBFTF is envisaged to provide opportunities to SA Black Filmmakers. who are black directors directing films where the majority of the film rights are owned by Black Filmmakers to gain experience. to build a track record and to establish a brand.

EMERGING BLACK FILMAKERS FUND12

10. MEMBERSHIPS

• Opportunity to register five (5) Executives and one (1) admin staff of the partner company to attend a Regional Forum meeting;• Executive members have the opportunity to speak at these Regional meetings;• Provide input to the programme and influence the agenda of the Regional Forum;• Access to Forum Affiliates’ networks; and • Participate in regional projects and initiatives.

• To communicate the important role that the IDC plays in shaping South Africa’s economy;• For IDC leadership to share its plans for the agricultural sector with members of the chamber;• Business development through promoting IDC products and services to ABC members;• To source opportunities to fund businesses; and• Attendance of conferences/seminars – includes speaking opportunities.

• Networking with various industries that are members of the chamber;• Speaking at seminars, conferences and workshops; and• Profiling the IDC.

• Networking opportunities;• Marketing - dissemination of information to members of the chamber; and• Business referrals via the chamber.

• The IDC leadership gets to share their experiences with prospective professionals and impart skills. At the same time, the members get to know about the important role that the IDC plays in shaping South Africa’s economy;• This approach lends itself to business development through promoting IDC products and services to ABSIP members; • IDC professionals also get to attend conferences/seminars that are organised by ABSIP on pertinent issues that face the financial services sector

• Visibility and networking of the IDC.

• Networking opportunities.

• This platform does not only profile the IDC but also enables information sharing of best practices in development finance; • Participating in workshops and conferences; • Participating in study tours organised by AADFI; and• Take part in the peer review exercises.

• Opportunities to profile IDC;• Networking opportunities; and• Project pipeline and deal generation.

• Corporate branding on chamber promotional brochures & catalogues;• Branding /sponsorship of events; • Branding on electronic media (website, e-mail, newsletters);• Advertising in The Business Hi- Lite magazine; and• Complimentary places chamber dinners or breakfasts for IDC staff

• Profiling the IDC through speaking opportunities at BMF seminars, conferences and workshops.

Company Details Benefits to the IDC

WORLD ECONOMIC FORUM -REGIONAL PARTNERSHIP

AGRICULTURAL BUSINESS CHAMBER (ABC)

AHI BLOEMFONTEIN BUSINESS CHAMBER

DURBAN CHAMBER OF COMMERCE AND INDUSTRY

ASSOCIATION OF BLACK SECURITIES INVESTMENT PROFESSIONAL (ABSIP)

AFRICAN PROJECT ACCESS (APA)

BUSINESS WOMEN’S ASSOCIATION

ASSOCIATION OF AFRICAN DEVELOPMENT FINANCE INSTITUTIONS (AADFI)

EASTERN CAPE FORESTRY DEVELOPMENT FORUM

BORDER KEI CHAMBER OF COMMERCE - EAST LONDON

BLACK MANAGEMENT FORUM (BMF)

• Through its membership, the IDC is able to participate in issues that affect the business environment and in the national economy; • The IDC to help shape and formulate policy positions on business issues of national importance;• The IDC gets to showcase its position as a leading development finance institution, in line with its Leadership in Development strategy; and• A by-product of this is that the business community gets exposed to the IDC’s product offerings and creates a better understanding of its leadership role; and• SACCI’s various seminars and presentations where top speakers share important business insights.

• Adoption and utilisation of best practice information, benchmarking information, and people practice trends and analyses in the new world of work, understanding of lessons learnt and implementation advice, risks and considerations; • The membership affords the organisation opportunities to engage with specialist Human Capital advisers as and when required;• Guidance on where best practice information can be sourced; and• Opportunities for IDC to engage and network with other entities on people-related issues.

• Networking opportunities at its events;• Opportunity to gain information on export related matters;• Strengthening the bonds between members with interests similar to those of the IDC;• Opportunities for open debate on subjects of general interest to the export fraternity; and• Marketing exposure through the awards.

• Networking opportunities;• IDC is featured in the Lowveld Business and Investment Guide.

• Networking with Industries;• Speaking at seminars, conferences and workshop; and• Profiling the IDC.

• Networking opportunities;• Marketing by dissemination of information to members of the chamber; and• Business referrals via the chamber.

• Profile IDC as a funder of green (Biogas) projects; • Share IDC requirements for financing green projects; and• Networking opportunities with the industry.

• The association is devoted to promoting the growth of the country’s solar photovoltaic (PV) electricity market, and aims to contribute to the country’s renewable energy roll-out.

• Public private partnership networking opportunities; and• Dissemination of information between IDC and members of this organisation.

• Networking with the renewable energy industry; and• IDC is updated on regulatory matters that are relevant to the industry.

• Branding opportunity on the business chamber website; • Branding on the business chamber’s newsletter; and• Advertising in their magazine.

• The main benefit is that the IDC is at the forefront of efforts to turn around South Africa’s economy for sustainable economic development; • To position the IDC as a home-grown, patriotic development finance institution in South Africa and the continent;• The showcase the corporation’s efforts to fund and promote local manufacturing through local business that have been funded by the corporation, and thus lead by example; and• The corporation is able to promote its products and services amongst businesses that have similar localisation objectives.

• Institutional support, including capacity building; • Infrastructure and public private partnerships delivery;• Through its work in capacity building, research and contribution to policy formulation, the IDC has an opportunity to exchange information with fellow SADC development finance institutions and thereby contribute to SADC’s goals of economic growth and sustainable development;• For the IDC to work closely with the SADC-DFRC to build capacity and develop strategies to strengthen the development finance sector;• The IDC also benefits from the SADC Region’s goal of regional integration, as spearheaded by the DFRC; and• Belonging to the network ensures that the IDC is at the forefront, keeping up with developments in the DFI space.

• IDC get to participate in the SAVCA Venture Capital subcommittee;• IDC also benefits from venture capital-specific research conducted by SAVCA on behalf of its members; • Benefits from the research and lobbying done by SAVCA on behalf of all its members (including both Private Equity and Venture Capital participants);• To stimulate the growth of the SA Venture Capital Industry by playing a part in strengthening the overall SA venture capital ecosystem through collaboration with other venture capital funders and investors; and• Gain insight into the funding mandates, focus areas, and approach to new and follow-on investments of other venture capital funders.

• Access to corporate members for potential funding;• Speaking opportunities; and• Stakeholder relations.

• IDC has access to members from different subsectors thus providing investment opportunities for the corporation.

• Networking and profiling IDC (through Forestry and Wood Products SBU) Information sharing within the sector.

SOUTH AFRICAN CHAMBER OF COMMERCE AND INDUSTRIES (SACCI)

CORPORATE EXECUTIVEBOARD (CEB)

EXPORTERS CLUB (PORT ELIZABETH)

LOWVELD CHAMBER OF BUSINESS AND TOURISM

MCCI (BUSINESS CHAMBER)

PIETERMARITZBURG CHAMBER OF BUSINESS

SOUTHERN BIOGAS INDUSTRY ASSOCIATION (SABIA)

SAPVIA

KZN GROWTH COALITION

SOUTH AFRICAN INDEPENDENT POWER PRODUCERS ASSOCIATION (SAIPPA)

NELSON MANDELA BAY CHAMBER

PROUDLY SOUTH AFRICAN

SOUTH AFRICAN DEVELOPMENT COMMUNITY-DEVELOPMENT FINANCE RESOURCE CENTRE(SADC-DFRC)

SOUTH AFRICAN VENTURE CAPITAL AND PRIVATE EQUITY ASSOCIATION(SAVCA)

CAPE REGIONAL CHAMBER

POLOKWANE CHAMBER OF COMMERCE

FOREST SECTOR BBBEE CHARTER COUNCIL

• This membership positions the IDC as an environmentally responsible DFI; and• Membership provides the IDC with an opportunity to participate in the formulation of UPEPFI guidelines• Networking, and knowledge sharing.

• Complimentary participation in the workshops organised by the chamber;• Contribution in the formulating policies; and• Participation in special Investment meetings with chamber board.

• This membership assist the IDC to engaging with a key player in the promotion and facilitation of international trade;• The membership also promote enterprise development, skills development training and business advisory services; and• Networking, participate in the chambers programmes.

• The Institute is committed to playing a meaningful role in securing sustained growth in the national savings rate to enhance the financial health of the nation and the well-being of its citizens; and• The institute foster a culture of savings through initiatives that: raise levels of awareness, cause debate and develop savings outlook that will influence decision-making by public and private sector institutions and consumers.

• The IDC gets the advantage of sourcing talent directly from a pool of highly qualified professionals seeking quality advancement in the financial services sector; • Access to groomed and fully vetted AWCA bursary recipients for possible training contracts. • Inclusion on AWCA’s CSI initiatives; • Three complementary individual memberships, • Recognition and profiling of the organisation and its selected employees at AWCA events throughout the year; • An opportunity to further demonstrate a commitment to transformation policies in the corporate environment and alignment with the progressive AWCA brand; • Standing invitation to regular events held i.e. Power Tea, Out to Lunch, Roundtable Discussion, and Celebrate Success; • Preferential rates for staff on AWCA endorsed training and development programmes such as the Duke Women Leading Africa programme and the Fordham University- Emerging markets and Country Risk courses programme; and • Tailor-made collaborative initiatives, focusing on each individual corporate sponsor’s current vision.

UNITED NATIONS ENVIRONMENT PROGRAM FINANCIAL INITIATIVE (UNEPFI)

BLACK BUSINESS COUNCIL BBC

CHAMBER OF COMMERCE AND INDUSTRY –JOHANNESBURG (JCCI)

SOUTH AFRICAN SAVINGS INSTITUTE(SASI)

AFRICAN WOMEN CHARTERED ACCOUNTANTS (AWCA)

11. CUSTOMER RELATIONSHIP MANAGEMENT

Understanding our customers’ needs is part of our customer experience strategy and works as a yard stick to measure and improve our service levels. The approach assists us towards continuous service improvements at every interaction. For this purpose, we conduct customer satisfaction surveys to measure the satisfaction levels of our clients and use the feedback to address service issues, including implementing remedial actions.

The Annual Customer Satisfaction Survey focusses on existing clients (clients who have gone through the entire IDC application process, including disbursement of funding). The survey excludes clients who are in Legal and Workout & Restructuring. The study is conducted by an independent research agency, which uses a 10-point scale where a score of 7/10 is considered good, 8-9/10 as very good and 10 as excellent.The Corporation scored 7.8 for the overall service experience in the 2017/2018 financial year. A total of 231 respondents, contacted randomly, participated in the survey with a representative sample across the various Strategic Business Units.

Respondents were also asked to rate the IDC on specific service attributes that were categorised under four dimensions, namely;

(a) Solutions/Products and Services, (b) Service Efficiency, (c) Customer Interface, and (d) Business Approach. The overall score for the four dimensions are depicted below.

ANNUAL CUSTOMER SATISFACTION SURVEY

Not applicable

Applied

The board should lead ethically and effectively

The board should govern the ethics of the company in a way that supports the establishment of an ethical culture

The board should ensure that the company is and is seen to be a responsible corporate citizen

Leadership

Organisational ethics

Responsible corporate citizenship

Principle 1

Principle 2

Principle 3

2-5, 51-54

51, 55-57

60-61

• Ethical culture• Good performance• Effective control• Legitimacy

Partially applied

Not applied

In progress

OVERALL, CLIENTS ARE SATISFIED WITH THE AREAS OF CONCERN BEING TURNAROUND, RESPONSIVENESS AND COMMUNICATION.

SUMMARY OF THE KEY RESEARCH FINDINGS

KEY STRENGTHS

SUGGESTIONS FOR IMPROVEMENTS

PLANS FOR THE 2018/19 FINANCIAL YEAR

BENEFITS

• High level of professionalism in business dealings• A supportive business partner and funder• Competitive pricing/good interest rates• Availability of applicable solutions/products that meet the clients’ requirement• Satisfactory service levels

• Turnaround time• Improve communication• Improve internal processes• Simplify rigid/not flexible contracts• Streamline the application process

The key focus is to enhance client interactions through face-to-face contact as well as through our online platforms. In addition, we see opportunities to create avenues for our clients to interact with each other and in that manner facilitate mutual business relationships.

The findings enable the IDC to have a full view and understanding of the customer experience through the application and after-care journey. This has equipped the corporation to implement remedial actions to meet and exceed the clients’ expectations.

12. KING IV CHECKLIST

Key Application of the king IV report focus on

LEADERSHIP, ETHICS AND CORPORATE CITIZENSHIP

The board should appreciate that the company’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process

The board should serve as the focal point and custodian of corporate governance in the company

The board should ensure that its arrangements for delegation within its own structures promote independent judgment and assist with balance of power and the effective discharge of its duties

The board should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities

The board should govern technology and information in a way that supports the company setting and achieving its strategic objectives

The board should ensure that the company remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives an positive outcomes in the short, medium and long term

The execution of its governance role and responsibilities, the Board should adopt a stakeholder-inclusive approach that balances the needs, interest and expectations of material stakeholders in the best interest of the company over time

The board should ensure that reports issued by the company enable stakeholders to make informed assessments of the company’s performance, and its short, medium and long term prospects

The board should compromise the appropriate balance of knowledge, skills, expertise, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively.

The board should govern risk in a way that supports the company in setting and achieving its strategic objectives

The board should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the company being ethical and a good corporate citizen

The board should ensure that assurance services and functions enable an effective control environment , and that these support the integrity of information for internal decision-making and of the company’s external reports

The governing body of an institutional investor organisation should ensure that responsible investment is practiced by the organisation to promote the good governance and the creation of value by the companies in which it invests.

The board should ensure that the evaluation of its own performance and that is committees, its chair and its individual members, support continued improvement in its performance and effectiveness.

Strategy and performance

Primary role and responsibilities of the board

Committees of the board

Appointment and delegation to management

Technology and information governance

Remuneration governance

Stakeholders

Reporting

Composition of the board

Risk governance

Compliance governance

Assurance

Institutional investor

Evaluations of the performance of the board governing body

Principle 4

Principle 6

Principle 8

Principle 10

Principle 12

Principle 14

Principle 16

Principle 5

Principle 7

Principle 11

Principle 13

Principle 15

Principle 17

Principle 9

6, 9, 13-14, 18-19, 26-49

51-53

52-56

15, 22-25, 52-56

62-63

57-60

26-50, 60-61

66-72

20-21, 51

10-11, 63-65

65-66

63, 66, 79-82

61-62

54-55

STRATEGY, PERFORMANCE AND REPORTING

GOVERNING STRUCTURES AND DELEGATION

GOVERNANCE FUNCTIONAL AREAS

13. GRI TABLE

Leadership Commentary: • Minister’s Foreword • Chairperson’s Statement • Chief Executive Officer’s Statement

The location of the organization’s headquarters: 19 Fredman Drive, Sandton, Johannesburg, South Africa

The primary brands, products and services: • Group overview and operational structure• Approach to sector development• Business model• The IDC funding model

Markets served, geographic breakdown and sectors served: • Group overview and operational structure Business model• Approach to sector development• Geographical breakdown• The IDC funding model

Significant locations of operation: • Operational footprint

Staff profile

The nature of ownership and legal form: • Mandate• Group structure

The scale of the organization: • Total number of employees• The operational and project footprint in South Africa and the rest of the continent

• Products and services provided• Net revenues and capitalization• Business model

The Industrial Development Corporation of South Africa Limited

Key impacts, risks and opportunities: • Economic, environmental and social impacts• Materiality• Strategy• Stakeholders• Financial sustainability• Risk management• Targets and performance

DESCRIPTION

G4-1

G4-5

G4-6

G4-10

G4-7

G4-9

G4-4

G4-8

G4-3

G4-2

INDICATOR

2-34-522-23

84

7

59, online

6Online

59 and online 7 and online 669-758-9

14-15, 79 and online 13-14 8-9 6 and online section on special schemes

15 and online 8-9137 and online

79

1, 2-5, 7-9, 12-14, 48-5016-176, 13-1416-1712, 73-7810-11, 61-6612, 18-19

*

*

*

*

*

*

*

*

*

Selected indicators are assured

EXTERNAL ASSURANCEPAGE

GLOBAL REPORTING INITIATIVE (GRI) G4 INDEX 2018

GENERAL STANDARD DISCLOSURES

STRATEGY AND ANALYSIS

ORGANISATIONAL PROFILE

The IDC operates within the provisions of all relevant labour legislation including the provision of minimum notice periods regarding operational changes should these arise

Investments in subsidiaries

The IDC’s Environmental and Social (E&S) framework is aligned to the Precautionary Principle: • Mitigating key risks• IDC funding process and business support • Natural environment (indirect risks)• Enterprise risk management

The boundary for each material aspect is explained throughout the report as referenced in this GRI index

The organization’s supply chain is discussed under the IDC funding process and the online section on Procurement

Explain the process for defining the report content

Stakeholder engagement table

Stakeholder engagement practices, feedback surveys and ethics

There were no significant changes during the reporting period regarding size, structure or ownership. The aim of Project Evolve was to identify the sectors where the IDC will be playing a proactive role in developing industry.

List all the material aspects identified in the process for defining report content

Stakeholder identification

Externally developed charters, principles, or other initiatives to which the IDC subscribes or which it endorses: B-BBEEE ratings, Signatory to UNEP-FI, Guided by the PFMA, King III checklist, GRI G4 reporting guidelines

The boundary for each aspect is explained throughout the report at each indicator

Using the GRI 4 format, we continue to expand boundary to include more material subsidiaries in some aspects

G4-11

G4-17

G4-12

G4-18

G4-24

G4-26

G4-13

G4-19

G4-25

G4-15

G4-21

G4-23

G4-14

G4-20

57-61

16-17, 62, 65, 72-74, notes to the annual financial statements

6 and online

79

Online

17 and online

13

16-17 and online - GRI Aspects can be found in the GRI checklist in the online section

16-17 and online

Online

Throughout the report

79

61-65661-6263-65

Throughout the report and online - GRI Aspects can be found in the GRI checklist in the online section

*

Yes, Consolidated and separate financial statements independently audited

*

*

*

*

*

*

*

*

*

*

*

*

Associations and national or international advocacy organizations of which IDC is a member, special funds, building partnerships, assisting government/public sector

There were no re-statements of information and no restatements of information were required

G4-16

G4-22

Online

79

*

*

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

STAKEHOLDER ENGAGEMENT

Key topics and concerns that have been raised through stakeholder engagement and the organisation’s response to those key topics and concerns, including the identification of material issues, material issues table, the risk review, Directors’ Report

G4-27 22-23, 2-5, 10-11, 22-23, 57-65, throughout the report *

The reporting period is for the fiscal year 1 April 2016 to 31 March 2017

Key contacts are listed on the inside back cover of the report

The reporting cycle is annual

External assurance

Ethics and Values

The last report was issued for the year ended 31 March 2016

The report contains Standard Disclosures from the GRI G4 Core Sustainability Guidelines

Governance structure

G4-28

G4-31

G4-30

G4-33

G4-56

G4-29

G4-32

G4-34

79

84-85

79

80, 69

6, 54-56

79

79, GRI table online

53-56

*

*

*

*

*

*

*

*

REPORT PROFILE

ETHICS AND INTEGRITY

G4-DMA

G4-EC2

G4-EC6

G4-EC1

G4-DMA

Economic overview, Policy environment, Our mandate, Governance

Risks and opportunities posed by climate change that have the potential to generate substantive changes in operations, revenue or expenditure

The IDC provide percentages of designated groups in senior management positions, in line with South Africa’s B-BBEE aspirations

Direct economic value generated and distributed

The IDC attempt to eliminate all forms of discrimination against minority groups through the Minority Fund Schemes and the application of the BEE scorecard

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

1-9, 12-14, 18-19, 22-23, 48-56

38-39

57-59 and online

73-78

1, 7-9, 18-19, 50 and online section on the special funds

*

*

*

Yes

*

EXTERNAL ASSURANCE

SPECIFIC STANDARD DISCLOSURES

STANDARD DISCLOSURE TITLE

DMA AND INDICATORS

IDENTIFIED OMISSION(S)

REASON(S) FOR OMISSION(S) PAGE

CATEGORY: ECONOMIC

MATERIAL ASPECT: ECONOMIC PERFORMANCE

MATERIAL ASPECT: MARKET PRESENCE

G4-EC9

G4-EC8

G4-EN3

G4-DMA

G4-DMA

G4-EN16

G4-EN22

G4-DMA

G4-DMA

G4-DMA

G4-EN5

G4-EN9

G4-EN15

G4-DMA

Proportion of spending on local suppliers at significant locations of operation, B-BBEEE code of good practice and preferential procurement

Performance highlights, SBU sector-specific performance reports, Development funds, Investing in communities, B-BBEE, Indirect impacts

Energy consumption within the organization

Natural Environment

Natural Environment

Energy indirect GHG emissions (Scope 2)

Total water discharged by quality and destination

Procurement

An economic overview and the policy environment are addressed in the Leadership Commentary.

Natural Environment

Energy intensity

Water sources significantly affected by withdrawal of water

Direct GHG emissions (Scope 1)

Natural environment

Fully disclosed

Fully disclosed

Partially disclosed

Fully disclosed

Partially disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Partially disclosed

Partially disclosed

Partially disclosed

The information is currently unavailable



Courier services not included in Scope 1 calculations as the couriers are expected to report on their impact separately.

Online

1-5, 26-47, 48-50, online section on special funds

61 and online

61 and online

61 and online

61 and online

61 and online

56 and online

2-5

61 and online

61 and online

61 and online

61 and online

61 and online

*

*

*

*

*

*

*

*

*

*

*

*

MATERIAL ASPECT: PROCUREMENT PRACTICES

MATERIAL ASPECT: INDIRECT ECONOMIC IMPACTS

MATERIAL ASPECT: ENERGY

MATERIAL ASPECT: WATER

MATERIAL ASPECT: EMISSIONS

MATERIAL ASPECT: EFFLUENTS AND WASTE

CATEGORY: ENVIRONMENTAL

G4-LA1

G4-DMA

G4-LA9

G4-LA6

G4-DMA

G4-DMA

G4-LA2

G4-LA4

G4-LA5

G4-DMA

G4-LA10

Total number and rates of new employee hires and employee turnover by age group, gender and region

Natural environment

Average hours of training per year per employee by gender and by employee category

Type of injury and rates of injury, occupational diseases, lost days, absenteeism, and total number of work-related fatalities, by region and by gender

Human Capital - Minimum notice periods regarding operational changes, and whether these are specified in collective agreements.

Human Capital

Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation

Minimum notice periods regarding operational changes and whether these are specified in collective agreements.

Percentage of total workforce represented in formal joint management-worker H&S committees that help monitor and advise on OHS programs

Human Capital - Growing and developing our talented workforce

Programs for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Partially disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

The IDC operates within the provisions of all relevant labour legislation including the provision of minimum notice periods regarding operational changes should these arise.

The IDC operates within the provisions of all relevant labour legislation including the provision of minimum notice periods regarding operational changes should these arise.

57-61 and online

Online

58 and online

Online

57-61 and online

57-61 and online

Online

57-59

57-59

*

*

Yes

*

*

*

*

*

*

*

Yes

MATERIAL ASPECT: EMPLOYMENT

MATERIAL ASPECT: LABOUR/MANAGEMENT RELATIONS

MATERIAL ASPECT: LABOUR/MANAGEMENT RELATIONS

MATERIAL ASPECT: TRAINING AND EDUCATION

SUB-CATEGORY: LABOUR PRACTICES AND DECENT WORK

CATEGORY: SOCIAL

G4-LA11

G4-LA12

G4-LA14

G4-LA16

G4-HR1

G4-HR3

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

Human Capital - Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

Percentage of new suppliers that were screened using labour practices criteria

Human Capital - Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms

Total number and percentage of significant investment agreements and contracts that include human rights clauses or that underwent human rights screening

No instances of discrimination were found

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

Not disclosed

Fully disclosed


57-59

57-61 and online

56 and online

57-61

57-61 and online

*

Yes

*

*

*

G4-DMA

G4-DMA

G4-DMA

G4-DMA

G4-DMA

G4-DMA

Human capital

Procurement

Human capital

Natural environment

Human capital

Human capital

Fully disclosed

Fully disclosed

Fully disclosed

Not disclosed

Fully disclosed

Not disclosed



Assessing our suppliers’ labour practices is not materialto the IDC’s business

57-61 and online

56 and online

57-61

57-61

*

*

*

*

*

MATERIAL ASPECT: DIVERSITY AND EQUAL OPPORTUNITY

MATERIAL ASPECT: SUPPLIER ASSESSMENT FOR LABOUR PRACTICES

MATERIAL ASPECT: LABOUR PRACTICES GRIEVANCE MECHANISMS

MATERIAL ASPECT: LABOUR PRACTICES GRIEVANCE MECHANISMS

MATERIAL ASPECT: INVESTMENT

MATERIAL ASPECT: NON-DISCRIMINATION

MATERIAL ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

SUB-CATEGORY: HUMAN RIGHTS

G4-SO4

G4-PR5

G4-FS7

G4-SO8

Communication and training on anti-corruption policies and procedures

Customer satisfaction survey results

Monetary value of products and services designed to deliver a specific social benefit for each business line broken down by purpose

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

Fully disclosed

Fully disclosed

Fully disclosed

Fully disclosed

There were no contraventions, penalties, sanctions or fines imposed on the IDC due to non-compliance with regulatory requirements

64 and online

17 and online

6, 8-9 and online section on special funds

Yes

*

*

*

G4-HR4

G4-FS13

G4-SO3

G4-DMA

G4-DMA

G4-DMA

Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and measures taken to support these rights

Access points in low populated or economically disadvantaged areas by type

Total number and percentage of operations assessed for risks related to corruption and the significant risks identified

Governance - Compliance with relevant laws and regulations

Our main business and funding activities, satisfying Customers

IDC’s mandate, Strategic pillars, Funding model, Operational structure, Strategic Business Units, Investing in communities, Corporate governance

Not disclosed

Fully disclosed

Partially disclosed

Fully disclosed

Fully disclosed

Fully disclosed


The information is subject to specific confidentiality constraints

7

61-63

66-67

6, 8-9, 13

6, 8-9, 13-14, 15, 26-47, 48-49, 51-57

*

*

Yes

*

*

*

G4-DMA

G4-DMA

Our mandate and strategic pillars, Satisfying Customers, Investing in Communities

Mitigating key risks, Material issues, Governance

Fully disclosed

Fully disclosed

6, 13, 17, 48-49

10-12 and online

*

*

SUB-CATEGORY: SOCIETY

SUB-CATEGORY: PRODUCT RESPONSIBILITY

MATERIAL ASPECT: LOCAL COMMUNITIES

MATERIAL ASPECT: PRODUCT AND SERVICE LABELLING

MATERIAL ASPECT: PRODUCT PORTFOLIO

MATERIAL ASPECT: ANTI-CORRUPTION

MATERIAL ASPECT: COMPLIANCE


G4-PR8

G4-FS11

G4-PR9

Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

Percentage of assets subject to positive and negative environmental and social screening

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations concerning the provision and use of products and services

Not disclosed

Partially disclosed

Fully disclosed



Processes to register customer complaints being implemented

Only high risk clients are currently assessed

There were no contraventions, penalties, sanctions or fines imposed on the IDC due to non-compliance with regulatory requirements

61-62 and online

51-57

*

*

*

G4-DMA

G4-FS10

G4-DMA

Satisfying Customers

Percentage and number of companies held in the institution’s portfolio with which the reporting organization has interacted on environmental or social issues

Governance

Partially disclosed

Fully disclosed

Fully disclosed


IT systems are being implemented for the protection of personal information

All transactions for this financial year and a percentage of our existing clients were monitored for EHS performance

17 and online

61-62 and online - GRI Aspects can be found in the GRI checklist in the online section

51-57

*

*

*

G4-FS8Monetary value of products and services designed to deliver an environmental benefit for each business line broken down by purpose

Fully disclosed

6, 8-9 and online section on special funds

*

MATERIAL ASPECT: CUSTOMER PRIVACY

MATERIAL ASPECT: ACTIVE OWNERSHIP

MATERIAL ASPECT: COMPLIANCE

* INDICATOR NOT EXTERNALLY ASSURED OR NO EXTERNAL ASSURANCE REQUIRED.

- END -

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